FTC and 22 States Sue Amazon Over Alleged Ad Price Manipulation

The US Federal Trade Commission and 22 states filed a lawsuit against Amazon on Monday, alleging that the company systematically overcharged advertisers on its platform. The complaint claims that Amazon manipulated its advertising auction system to secretly raise minimum prices, resulting in losses of $20 billion or more for approximately 1.2 million advertisers. According to the FTC, more than 500,000 of these affected customers were small and medium sized businesses. The regulator further alleges that these inflated advertising costs were passed on to consumers through higher prices for essential goods and groceries.

The lawsuit focuses on Amazon's use of second price auctions, where the winner typically pays slightly more than the second highest bid. The FTC alleges that Amazon intervened by placing its own artificial shill bids to inflate the final price. This practice reportedly affected up to 80 percent of sponsored product auctions. The government is seeking civil penalties and refunds for the affected advertisers.

Amazon has denied the allegations, calling the lawsuit misguided. In a blog post and statements to the press, the company argued that its advertising policies prioritize relevance for buyers and that the average cost per click has remained stable from 2019 to 2024. Amazon claims it actually saved advertisers approximately $8 billion between 2021 and 2025 by prioritizing ad relevancy over bid price alone. The company also asserted that the FTC's claims are based on a misunderstanding of how advertisers operate.

This legal action follows other disputes between the company and the FTC. Last year, Amazon agreed to pay $2.5 billion in fines and refunds to settle allegations that it deceived customers into signing up for Prime subscriptions. In 2023, the company paid $30 million to settle claims regarding user privacy violations involving Alexa and Ring devices.