FTC and 22 States Sue Amazon Over Alleged Ad Price Manipulation

The Amazon logo is seen at one of its offices. The US Federal Trade Commission (FTC) and a bipartisan group of 22 states have filed a lawsuit against Amazon, alleging that the company overcharged more than a million advertising customers by manipulating online auctions used to set ad prices. The lawsuit, filed on Monday, claims that the alleged scheme has generated approximately $20 billion from advertising customers since 2019. The complaint states, "Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits," and was filed in Washington state, where Amazon is headquartered. In response, Amazon stated that it "strongly disagrees" with the allegations and described the lawsuit as "misguided." The FTC and the states also assert that Amazon's actions have harmed consumers, as the increased costs are passed onto shoppers. The complaint notes, "Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result," which Amazon disputes, stating that the FTC "wants the public to believe this case is about higher prices for consumers. It is not." Following the announcement of the lawsuit, Amazon's shares fell by 2.5% on Monday. Many brands and sellers compete on Amazon for Sponsored Product ads and Sponsored Brands ads, which are auctioned to the highest bidder when consumers search for products using keywords. The complaint alleges that Amazon has charged its Sponsored Products advertisers their own winning bid nearly 80% of the time in what are known as "second price" auctions, where advertisers expect to pay one cent more than the next highest bidder. The lawsuit claims that Amazon's methods were driven by dissatisfaction with the revenue generated from its advertising auctions. Amazon countered that the FTC "fundamentally misunderstands how advertisers operate," and noted that "Average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads, and roughly 92% of placed ads are not given to the highest bid." This is not the first time Amazon has faced scrutiny from the FTC; last year, the company settled a case for $2.5 billion over allegations of enrolling consumers in its Prime subscription without consent and making it difficult to cancel.