Amazon secretly overcharged more than a million advertising customers by manipulating online auctions it uses to set ad prices, according to a lawsuit filed by the US Federal Trade Commission (FTC) and a bipartisan group of 22 states.
The lawsuit, filed on Monday, claims the alleged scheme has likely netted Amazon $20bn (£14.8bn) from advertising customers since 2019.
According to the complaint, Amazon “overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits.”
In a statement to the BBC, Amazon said it “strongly disagrees” with the premise that it misled advertisers and called the suit “misguided.”
Both the FTC and the states contend that extra costs have been passed on to shoppers, harming consumers as well.
“Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result,” the complaint states, prompting Amazon’s swift rebuttal.
After the announcement, Amazon’s shares fell 2.5% on Monday.
Many brands and sellers compete on Amazon to place Sponsored Product and Sponsored Brands ads when consumers search for products using keywords. Those placements are then auctioned to the highest bidder.
The complaint alleges Amazon secretly charged advertisers more in so‑called “second price” auctions, wherein prospective advertisers expect to pay one cent more than the next highest bidder for each bid they win. In practice, Amazon allegedly charged its Sponsored Product advertisers its own winning bid close to 80% of the time.
The suit states Amazon’s methods were spurred because “it was unhappy about how much revenue its advertising auctions were generating.”
Amazon replied that the FTC “fundamentally misunderstands how advertisers operate”, saying advertisers adjust bids based on real‑world performance, not theoretical auction mechanics.
Amazon added, “Average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads, and roughly 92% of placed ads are not given to the highest bid.”
Amazon has previously tangled with the consumer watchdog: last year it settled a case with the FTC that alleged it enrolled millions of consumers in its Prime subscription offering without their consent and made it difficult for consumers to cancel. The settlement was for $2.5bn, including civil penalties and consumer refunds.
