The U.S. Federal Trade Commission (FTC) and a bipartisan group of 22 states filed a lawsuit on Monday against Amazon, alleging the company manipulated online advertising auctions to overcharge more than one million customers. The complaint, filed in Washington state, claims the e-commerce firm has collected approximately $20 billion in revenue through this practice since 2019.
The legal action focuses on how Amazon auctions placements for "Sponsored Product" and "Sponsored Brands" ads, which appear when users search for keywords on the platform. While advertisers expected to participate in "second price" auctions—where the winner pays one cent more than the next highest bidder—the FTC alleges Amazon replaced results with higher prices to increase its own profits.
Amazon issued a statement strongly disagreeing with the allegations, describing the lawsuit as "misguided" and asserting that the FTC "fundamentally misunderstands" the advertising market. The company stated that advertisers base their bids on performance rather than auction mechanics. Amazon further noted that average winning bids for Sponsored Products search ads fell 50% between 2019 and 2025.
The scale of the alleged impact is cited at $20 billion since 2019, a figure that the FTC claims resulted from Amazon charging the winning bid price instead of the expected second-price rate approximately 80% of the time. A similar previous case involving Amazon's Prime subscription service resulted in a $2.5 billion settlement for civil penalties and consumer refunds.
The immediate market response saw Amazon shares close 2.5% lower on Monday following the announcement. The FTC maintains that consumers will continue to suffer "substantial injury" until the practices are addressed. Amazon maintains that roughly 92% of placed ads are not given to the highest bid.