In brief
The U.S. Federal Trade Commission, backed by 22 states, has filed a lawsuit alleging that Amazon secretly manipulated its advertising auctions to overcharge advertisers, amassing roughly $20 bn in excess costs since 2019. The complaint claims Amazon routinely replaced legitimate auction results with higher, company‑set prices, benefiting its own revenue at the expense of brands and consumers. In response, Amazon dismissed the allegations as unfounded, arguing that it does not mislead advertisers and that ordinary buyers are not harmed. The lawsuit also highlights potential consumer price increases due to Amazon's inflated ad costs. The case has already prompted a 2.5 % drop in Amazon's share price following its announcement.
FTC and a bipartisan coalition of 22 states have filed a lawsuit alleging that Amazon secretly overcharged more than a million advertising customers by manipulating second‑price auction mechanics, claiming the practice has yielded about $20 bn in excess revenue since 2019.
According to the complaint, Amazon consistently replaced the true auction price—one cent above the next highest bid—with an artificially inflating price set by the company, thereby extracting higher fees from brands and sellers competing for Sponsored Product and Sponsored Brand placements on its platform.
The lawsuit states that Amazon’s own algorithm would often charge advertisers up to 80 % of the winning bid, undermining the fairness of the auction system. It argues that the company was “unhappy” with the revenue generated from its ad auctions and deliberately altered the pricing to maximize profits.
Amazon denied the allegations, describing the suit as “misguided” and asserting that it “fundamentally misunderstands how advertisers operate.” The company’s statement also claimed that consumer prices were not directly affected by the reported overcharging practices.
The filing also includes claims that Amazon’s inflated advertising costs ultimately passed onto consumers, causing “substantial injury” as higher ad revenue translates into larger shop prices on its marketplace.
Share prices fell 2.5 % on Monday following the announcement, reflecting investor concerns over potential regulatory backlash.
Amazon has previously faced consumer‑watchdog scrutiny, most notably settling a $2.5 bn case last year related to its Prime subscription, which included civil penalties and consumer refunds. The current lawsuit underscores growing pressure on tech giants to ensure transparency and fairness in their platform‑based services.
