Amazon rigged billions in ad pricing, lawsuit from states and US watchdog alleges
Amazon responded to the lawsuit, arguing the US Federal Trade Commission "misunderstands" their ad market.
A lawsuit brought by the US Federal Trade Commission (FTC) and a bipartisan coalition of 22 states alleges that Amazon illicitly inflated advertising prices by manipulating its online ad auctions, secretly overcharging over a million advertising clients.
Filed on Monday, the lawsuit from the FTC and the states claims that this alleged scheme has likely generated $20 billion for Amazon from its advertising customers since 2019.
A complaint filed in Washington, Amazon's home state, asserts, "Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits."
In a statement provided to the BBC, Amazon "strongly disagrees" with the accusation of misleading advertisers, labeling the lawsuit as "misguided."
Beyond advertisers, the FTC, a US consumer watchdog, and the states contend that Amazon customers have also suffered harm due to these additional costs being passed on to shoppers.
The complaint states that "Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result," a claim Amazon swiftly pushed back against.
"The FTC wants the public to believe this case is about higher prices for consumers. It is not," Amazon declared in its statement.
Following the lawsuit's announcement, Amazon's shares declined, closing 2.5% lower on Monday.
Numerous brands and sellers vie on Amazon to secure placements for Sponsored Product ads and Sponsored Brands ads when consumers search for products using keywords on Amazon's e-commerce platform. These placements are then auctioned off to the highest bidder.
The complaint accuses Amazon of secretly charging advertisers more in what are known as "second price" auctions, where prospective advertisers anticipate paying one cent more than the next highest bidder for each winning bid. However, the complaint alleges that Amazon has, in practice, charged its Sponsored Products advertisers their own winning bid nearly 80% of the time.
The lawsuit claims that Amazon's methods were motivated by its dissatisfaction with the revenue generated by its advertising auctions.
Amazon responded by stating that the FTC "fundamentally misunderstands how advertisers operate."
"Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics," Amazon said in its statement. The company added, "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 has previously clashed with the consumer watchdog. Last year, it settled a case with the FTC alleging that it enrolled millions of consumers in its Prime subscription service without their consent and deliberately made it difficult for them to cancel. Amazon settled that case for $2.5 billion, which included civil penalties and consumer refunds.