Amazon is sued by the FTC and 22 states for ‘secretly’ overcharging advertisers since 2019
Developing story first seen 2 hours ago
The US Federal Trade Commission and 22 states have sued Amazon, alleging the company secretly inflated advertising rates for more than six years and continues to deceive advertisers to this day. The lawsuit claims Amazon added hidden surcharges to its ad auctions, causing companies to unknowingly overpay for sponsored product placements, and that the practice was known internally after multiple employees raised concerns. Regulators argue the scheme ultimately drove up prices for American consumers, while Amazon has firmly denied any wrongdoing.
The FTC alleges the scheme has "likely illegally extracted" more than $20 billion from unwitting advertisers since 2019, with hidden surcharges applied almost every time a shopper clicks an ad on Amazon's site. Court filings cite internal memos, including one acknowledging that undisclosed reserve prices boosted short-term revenue but risked "hurting us in the long run." Amazon has rejected the claims as "misguided," saying the FTC "cites no evidence of consumer price increases" and, after reviewing 1.5 million pages of documents, relies on a handful of simplified communications to wrongly allege a companywide effort to deceive.
- FTC and 22 states sue Amazon over hidden ad auction surcharges
- Alleged scheme extracted over $20 billion from advertisers since 2019
- Amazon calls the lawsuit "misguided" and denies deceiving advertisers
New here? Start with this
Amazon runs a huge advertising business, selling brands and sellers space to promote their products on its website, such as "sponsored" listings that appear at the top of search results. These ad placements are typically sold through automated auctions, where advertisers bid against each other for space. The Federal Trade Commission is the main US government body that enforces consumer protection and competition law, and it can bring lawsuits against companies it believes have broken those rules.
This case centres on claims that Amazon added undisclosed extra charges into its advertising auctions, meaning businesses paying to advertise may have been charged more than they realised or agreed to. The FTC has been joined by attorneys general from 22 US states, giving the case significant institutional weight. Because so many companies rely on Amazon's platform to reach customers, any change to how its advertising costs work could affect a large share of online retail.
Amazon is one of the world's largest companies, and its advertising arm has grown into a major and highly profitable part of its business alongside retail and cloud computing. Disputes like this typically unfold through the US court system and can take months or years to resolve, often involving detailed evidence such as internal company documents. The outcome could have implications for how Amazon and other large platforms are required to disclose advertising costs in future.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Advocates of the FTC's action argue that advertisers are entitled to know the true terms of the auctions they participate in, and that quietly embedding reserve prices into bidding mechanics without disclosure crosses from clever pricing strategy into deception. They point to internal memos as evidence that concerns were raised inside Amazon itself, suggesting the company knowingly prioritised short-term revenue over transparency. On this view, regulators have a duty to intervene when a dominant marketplace operator controls both the auction and the disclosure of its rules, since advertisers have little practical ability to verify or contest what they are charged.
The case against
Amazon and its supporters would argue that dynamic pricing mechanisms, including reserve prices, are a routine feature of digital ad auctions across the industry, not inherently deceptive, and that sophisticated advertisers negotiate and monitor return on ad spend as a matter of course. They note that after reviewing 1.5 million pages of internal documents, the FTC has produced no direct evidence that consumers paid higher prices as a result, and caution that isolated, informally worded communications can be taken out of context to imply a companywide scheme that never existed. From this perspective, aggressive regulatory action risks punishing legitimate commercial judgement and discouraging the kind of iterative pricing experimentation that keeps advertising markets competitive.
Full account
Amazon is facing a lawsuit brought jointly by the US Federal Trade Commission and 22 state attorneys general, which accuses the retail giant of secretly inflating the price advertisers pay to place sponsored listings on its website and app. The complaint alleges that the conduct began in 2019 and has continued ever since, generating billions of dollars in extra revenue for Amazon at the expense of businesses that buy advertising space on the platform.
At the heart of the case is how Amazon's ad auctions are supposed to work. Advertisers bid for placements through a "second-price" system, under which the winning bidder should pay only a fraction more than the next-highest bid. The FTC's complaint alleges that Amazon quietly abandoned this mechanism, with its advertising division instead substituting a higher, internally calculated "proxy" price designed to boost the company's profits rather than reflect genuine competing bids. Regulators say the scheme, which some Amazon staff are said to have flagged internally, has likely stripped more than $20 billion from advertisers who were unaware their costs had been artificially raised. Internal documents cited in the case reportedly show employees acknowledging that undisclosed pricing floors lifted short-term revenue while risking longer-term damage to trust in the platform.
Officials argue the harm extended beyond advertisers themselves. The FTC contends that inflated advertising costs were largely passed on to ordinary shoppers through higher retail prices, with the agency's chairman, Andrew Ferguson, making this point publicly in outlining the case. The lawsuit accuses Amazon of breaching the FTC Act as well as numerous state consumer-protection statutes, and lands against a backdrop of continuing regulatory scrutiny of the company; it follows an earlier FTC action over Amazon's Prime subscription practices that was settled for $2.5 billion roughly a year ago.
Amazon has firmly rejected the allegations, describing the case as misguided and asserting that regulators have misunderstood how its advertising auctions function. The company says that after examining some 1.5 million pages of material covering six years of operations, the FTC has relied on a small number of internal messages taken out of context to construct a narrative of deliberate, company-wide deception. Amazon further disputes the claim that shoppers ultimately bore the cost, pointing to figures showing that the average winning bid for its Sponsored Products search adverts fell by roughly half between 2019 and 2024, and maintaining that the lawsuit offers no evidence of consumer prices actually rising as a result of its auction practices.
Where outlets differ
Source 1 foregrounds the human/internal-document angle — quoting an employee memo warning that hidden reserve prices would 'hurt us in the long run' — and gives more weight to Amazon's rebuttal about the FTC reviewing '1.5 million pages' yet relying on a handful of communications.
Source 2 gives more technical detail on the auction mechanics themselves, explaining the 'second-price' system and Amazon's substitution of a 'proxy' price, and names FTC chairman Andrew Ferguson directly along with his claim that costs were passed to consumers.
Only Source 2 mentions the specific legal basis (FTC Act plus over a dozen state laws) and the context of Amazon's earlier $2.5 billion Prime settlement.
Only Source 2 cites Amazon's specific statistic that average winning ad bids fell 50% between 2019 and 2024, while Source 1 focuses more on Amazon's general 'misguided' and 'fundamentally misunderstands' framing.
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