FTC and States Sue Amazon Over Alleged Advertising Price Manipulation

The Federal Trade Commission, together with attorneys general from 22 states, has filed a lawsuit against Amazon alleging that the company used a concealed surcharge to raise the price of advertising on its platform. The complaint says Amazon’s ad auctions, which are supposed to follow a “second-price” model where the winner pays just above the second-highest bid, were altered after the auction to replace the calculated price with a higher amount intended to increase Amazon’s profit margin.

According to internal communications cited in the filing, Amazon’s senior vice president for Amazon Ads described the practice as setting a “proxy 2nd price” calculated by the company rather than by an actual bidder. The FTC alleges that this scheme has extracted more than $20 billion from advertisers since 2019 and that the higher ad costs were largely passed on to consumers.

"The higher advertising prices were largely passed on to American consumers," wrote FTC Chairman Andrew Ferguson in a blog post announcing the lawsuit.

Amazon responded in a blog post, calling the lawsuit misguided and stating that the average winning bid for Sponsored Products search ads fell 50 % between 2019 and 2024. The company also disputed the claim that increased ad prices were transferred to consumers.