The US Federal Trade Commission and a bipartisan coalition of 22 state attorneys general have filed a lawsuit accusing Amazon of systematically manipulating online advertising auctions to charge more than a million advertisers inflated prices. According to the complaint, the scheme has generated approximately $20 billion in illicit revenue since 2019. The case was filed in federal court in Washington state, Amazon's home base.
The allegations centre on how Amazon conducts auctions for Sponsored Product ads and Sponsored Brands placements on its e-commerce platform. When brands and sellers bid for these ad slots, they expect to participate in a "second price" auction model, where the winning bidder pays only one cent more than the next highest offer. The lawsuit contends that Amazon has systematically overridden actual auction outcomes and charged advertisers their own winning bid approximately 80 percent of the time, rather than the lower second-price amount.
The complaint spans 181 pages and is supported by state attorneys general from California, Florida, New York, Louisiana, and Iowa, among others in the coalition. Regulators argue that the practice harms not only advertisers but also consumers, as businesses pass increased costs downstream to shoppers.
Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits, states the formal complaint filed with the court.
The lawsuit alleges that Amazon adopted this pricing manipulation strategy because the company was dissatisfied with revenue levels generated by its advertising auctions. The FTC had been investigating whether Amazon and Google properly disclosed ad-auction terms and reserve pricing, signalling broader regulatory scrutiny of digital advertising practices before formally filing this action.
Amazon responded with a statement strongly disagreeing with the allegations.
The FTC wants the public to believe this case is about higher prices for consumers. It is not, the company said. The retailer argued that
advertisers adjust bids based on real-world performance, not descriptions of auction mechanics.
The company also provided data in its defence, noting 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. Amazon characterised the FTC's position as a fundamental misunderstanding of how modern advertising markets operate.
Stock markets reacted negatively to the lawsuit announcement, with Amazon's share price closing 2.5 percent lower on the day the case was filed.
How does this fit into Amazon's broader regulatory challenges?
Amazon is facing a separate FTC antitrust trial already scheduled for October 2026 in federal court, which could overlap with or complicate the new ad-pricing case. This advertising lawsuit represents the third major federal case brought against Amazon by regulators, underscoring an expanding enforcement push against the technology giant.
The company has faced regulatory action from the FTC previously. Last year, Amazon settled a separate case alleging that it enrolled millions of consumers in its Prime subscription service without explicit consent and deliberately made cancellation difficult. That settlement required Amazon to pay $2.5 billion, comprising civil penalties and consumer refunds.
Beyond the United States, Amazon faces international regulatory pressure. Australia's ACCC has sued Amazon over alleged unfair contract terms related to ads introduced in Prime Video, affecting over a million users from 2023 to 2025. Additionally, a class action lawsuit filed in California alleges Amazon and Twitch used millions of hours of streamer content to train artificial intelligence without permission or compensation, seeking over $5 million in damages.
What are the specific allegations about auction manipulation?
The complaint details how Amazon's advertising auction system operates and where regulators say the company departed from fair practices. Advertisers bid for placement when consumers search for products using keywords on Amazon's platform. These placements are then allocated through an auction process designed to reward the highest bidder.
Under a properly functioning second-price auction, the winning advertiser should pay marginally more than the second-highest bid. This mechanism theoretically encourages honest bidding because advertisers know they will not overpay relative to competition. However, the lawsuit alleges that Amazon charged Sponsored Products advertisers their full winning bid close to 80 percent of the time, effectively converting the auction into a first-price model that benefits the platform operator at advertiser expense.
The FTC and states contend that this practice was deliberate and motivated by revenue concerns.
Amazon was unhappy about how much revenue its advertising auctions were generating, according to the complaint's characterisation of the company's reasoning.
What happens next?
Amazon will face the existing FTC antitrust trial in October 2026 unless the court changes the schedule. The company may face civil penalties and other remedies if found liable in the advertising auction case. The outcome could reshape how major technology platforms conduct advertising auctions and disclose their mechanisms to business customers.
The case also reflects a wider pattern of enforcement action against technology companies. Google has been fined €890 million by the EU under the Digital Markets Act for allegedly favouring its own apps and services over rivals, demonstrating that regulators globally are scrutinising how dominant platforms use their market position to advantage their own services.
Key Facts:
- The FTC and 22 states allege Amazon manipulated ad auctions to overcharge more than one million advertisers approximately $20 billion since 2019
- Amazon allegedly charged advertisers their full winning bid roughly 80 percent of the time instead of the second-price amount they expected to pay
- The lawsuit is filed in federal court in Washington and represents the third major federal regulatory case against Amazon
- Amazon faces an additional FTC antitrust trial scheduled for October 2026 that could complicate or overlap with this case
- The company previously settled a separate FTC case for $2.5 billion over Prime subscription practices
