FTC sues Amazon over advertising auction manipulation seeking $20 billion
The Federal Trade Commission and 22 state attorneys general are seeking over $20 billion in penalties from Amazon, alleging the tech giant secretly manipulated its digital advertising auctions to overcharge merchants and inflate consumer prices.
The Federal Trade Commission filed a lawsuit against Amazon on Monday, joined by 22 state attorneys general, accusing the e-commerce giant of secretly manipulating its digital advertising auctions. The complaint, lodged in the U.S. District Court for the Western District of Washington, alleges the company overcharged businesses for sponsored product placements and seeks civil penalties and restitution.
Regulators claim Amazon altered its auction mechanics in 2019 by introducing an undisclosed soft reserve price that artificially raised the minimum cost to win ad slots. While the company historically marketed its platform as a transparent second-price auction, the FTC alleges Amazon secretly injected its own bids to drive up costs.
This practice allegedly occurred in up to 80% of recent auctions, according to the complaint, which notes that pay-per-click costs surged by 50% during major shopping events. The agency estimates the strategy generated more than $20 billion in excess revenue for the company.
FTC Chairman Andrew Ferguson stated that "Amazon has millions of advertising customers who were misled into paying significantly higher prices." He noted that the agency believes these inflated merchant costs were ultimately passed down to everyday American consumers.
Amazon dismissed the legal action as "misguided" and argued the complaint fundamentally misunderstands how advertisers operate. The company disputed the claim that its practices harmed consumers, pointing to internal disclosures and asserting its auction systems actually saved advertisers $8 billion between 2021 and 2025.
The lawsuit targets a highly lucrative and rapidly expanding segment of the company's business. Amazon's advertising division generated over $68 billion in revenue last year, cementing its position as the third-largest digital ad seller globally behind only Alphabet's Google and Meta. Any disruption to this revenue stream could materially impact the company's overall profitability and future growth projections.
This marks the third major regulatory confrontation between the FTC and the e-commerce leader. Amazon paid $2.5 billion last September to resolve allegations regarding deceptive Prime membership practices.
Furthermore, the company faces a separate trial next year alongside 17 states over allegations that it leveraged monopoly power to inflate prices and harm third-party sellers. Amazon continues to deny those antitrust charges.
