The US Federal Trade Commission and 22 state attorneys general sued Amazon on Monday, alleging that the online retailer secretly inflated prices in advertising auctions and overcharged more than 1.2 million customers. The complaint, filed in the US District Court for the Western District of Washington on August 31, seeks an injunction, monetary relief and civil penalties where permitted. Amazon denies that it deceived advertisers.
The case focuses on placements for Sponsored Products, Sponsored Brands and Sponsored Display ads shown beside shopping results. According to the FTC, Amazon represented that advertisers participated in generalized second-price auctions, in which a winner pays only slightly more than the next-highest bid. The agency alleges that Amazon instead added undisclosed reserve prices and algorithmic surcharges that pushed charges closer to winning bids.
The complaint says the practices began with reserve pricing for some ads in 2018, expanded to Sponsored Products in 2019 and reached Display Ads by 2023. Regulators allege that more than 500,000 small and medium-sized businesses were among those affected and that the practices generated more than $20 billion in improper charges. The allegations have not been proven in court.
The FTC says Sponsored Products advertisers paid their full bid about 30% to 40% of the time in 2021, 70% in 2022 and roughly 80% in 2024. It alleges that internal systems sometimes inserted an invented auction participant to establish a higher price and that surcharges increased around Prime Day and Black Friday. The bipartisan state coalition says the conduct violated federal and state consumer-protection laws.
Amazon called the lawsuit misguided and said the government fundamentally misunderstands how its advertising auctions operate. The company said advertisers adjust bids according to performance rather than auction descriptions and estimated that its emphasis on ad relevance saved advertisers more than $8 billion from 2021 through 2025. It also rejected the claim of a companywide effort to deceive customers.
The litigation puts new scrutiny on one of Amazon's fastest-growing operations: its advertising business generated $68.6 billion in 2025, according to Axios. Unlike earlier federal cases involving Amazon's retail competition or Prime enrollment practices, this action directly targets the ad unit. The court will now assess the competing accounts, and no timetable for a ruling or potential compensation has been announced.
Comments