FTC and 22 states sue Amazon over alleged ad pricing manipulation
The Federal Trade Commission, joined by state attorneys general, filed a lawsuit claiming Amazon used hidden surcharges in its ad auctions, potentially overcharging advertisers by more than $20 billion.
The Federal Trade Commission filed a lawsuit on Monday accusing Amazon of systematically overcharging advertisers through changes to its pricing and auction systems. The complaint, filed in the U.S. District Court for the Western District of Washington and supported by 22 state attorneys general, alleges that Amazon introduced undisclosed surcharges in 2019 that may have generated over $20 billion in additional revenue.
"Amazon has millions of advertising customers who were misled into paying significantly higher prices," FTC Chairman Andrew Ferguson said, adding that the higher costs were largely passed on to consumers.
Amazon responded in a blog post, calling the lawsuit "misguided" and saying the complaint "fundamentally misunderstands how advertisers operate." The company said the FTC’s suit does not provide evidence of consumer price increases and noted that it has provided guidance on its auction and pricing tools.
"We've provided advertisers with guidance about our auctions and pricing in the main tools they use to manage their campaigns, and we continue to update that guidance," the company said, adding that it looks forward to presenting its case in court.
The FTC’s complaint focuses on Amazon’s sponsored product, brand, and display ads that appear alongside search results. It alleges that Amazon shifted from a "second-price" auction model—where advertisers pay only the minimum bid needed to win—to a system that added a "soft reserve price" without notice, effectively raising ad costs. Internal communications cited in the filing suggest an executive acknowledged the use of an "invented auction participant" to increase prices.
Amazon, the third-largest digital advertising platform globally, reported more than $68 billion in ad revenue last year, primarily from sponsored product ads. The company claims its auction system saved advertisers $8 billion between 2021 and 2025.
The FTC and the states allege the practices violate federal and state consumer-protection laws and are seeking civil penalties, restitution and other damages. The lawsuit follows a September settlement in which Amazon paid $2.5 billion to resolve an FTC probe into its Prime membership program.