FTC and 22 States Sue Amazon Over Alleged Systematic Manipulation of Ad Auction Pricing
Developed over time first seen 2 months ago
The US Federal Trade Commission and a bipartisan coalition of 22 states have sued Amazon, accusing the company of secretly rigging its advertising auction system to overcharge more than a million businesses since 2019. The complaint, filed in Washington state, alleges Amazon overrode genuine auction results with artificially inflated prices to boost its own profits, extracting roughly $20bn in the process, with the extra costs also passed on to consumers. Amazon has strongly rejected the claims, calling the lawsuit "misguided" and insisting the FTC has misunderstood how its advertising system works, and its shares fell 2.5% on the day the suit was announced.
The dispute centres on Amazon's "second price" auctions, where advertisers bidding for Sponsored Product placements expect to pay just one cent more than the next-highest bid, but the FTC alleges Amazon instead charged advertisers their full winning bid nearly 80% of the time, a practice the complaint says was driven by dissatisfaction over how much revenue the auctions were generating. Amazon countered that average winning bids for Sponsored Products search ads fell 50% between 2019 and 2025 and that around 92% of placed ads do not go to the highest bidder, arguing advertisers respond to real performance rather than auction mechanics. The case follows Amazon's $2.5bn settlement last year over allegations it enrolled Prime customers without consent and made cancellation deliberately difficult, marking the latest in a series of regulatory clashes between the company and the FTC.
- FTC and 22 states sue Amazon over alleged ad auction price rigging
- Amazon accused of pocketing ~$20bn by overcharging advertisers since 2019
- Amazon rejects claims; follows its earlier $2.5bn Prime settlement
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Amazon's advertising business lets companies pay to have their products shown prominently in search results on the site. These "Sponsored Product" placements are sold through an automated bidding system, similar to an auction, where businesses compete for slots and Amazon decides who pays what based on the bids submitted.
The Federal Trade Commission, the main US consumer protection regulator, has joined with 22 US states to bring a legal case against Amazon over how this auction system worked. The claim centres on whether Amazon charged advertisers more than the auction rules were supposed to allow, and whether that affected prices paid by both businesses and, ultimately, shoppers. Amazon disputes the allegations.
The case matters because Amazon is one of the largest online advertising platforms in the world, used by huge numbers of businesses to reach customers, and because it follows other recent legal and regulatory scrutiny of the company's practices in the US.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Advocates for the enforcement action argue that a dominant marketplace operator secretly overriding its own advertised auction mechanics amounts to a straightforward deception: advertisers were told they would pay one cent above the next bid but were, the complaint alleges, charged their full bid the vast majority of the time. From this view, regulators have a duty to police such conduct because it erodes trust in algorithmic marketplaces, harms small businesses who lack the leverage to negotiate terms, and ultimately raises prices for ordinary consumers who bear the passed-on costs. A bipartisan coalition of 22 states joining the action is seen as evidence that the concern crosses partisan lines and reflects a genuine, widely shared harm.
The case against
Amazon and those sympathetic to its position would argue that complex, opaque-sounding auction adjustments are common and necessary features of large-scale ad systems, used for purposes such as fraud prevention, reserve pricing, and balancing supply and demand, rather than evidence of secret price-rigging. They point to falling average winning bids and the fact that the large majority of ads are not awarded to the highest bidder as data suggesting advertisers have, in practice, benefited from a competitive and increasingly efficient system. From this perspective, regulators risk mischaracterising legitimate, disclosed business practices as fraud, and aggressive enforcement against successful platforms could chill innovation and discourage companies from offering flexible auction mechanisms that ultimately serve both advertisers and consumers.
Full account
Amazon is facing a lawsuit from the US Federal Trade Commission and a bipartisan coalition of 22 states, which accuse the retail giant of secretly manipulating its advertising auctions to overcharge sellers and brands for more than six years. Filed in Washington state, where Amazon is headquartered, the complaint alleges that the company routinely overrode genuine auction outcomes and substituted higher prices of its own choosing, extracting an estimated $20bn (£16bn) from more than a million advertising customers since 2019. Amazon has rejected the allegations outright, describing the case as "misguided" and insisting it misrepresents how its ad systems actually function.
At the heart of the complaint is Amazon's use of so-called second-price auctions, a format in which advertisers expect to pay only a fraction more than the next-highest bidder to win a placement, such as a cent above the runner-up bid. Regulators allege that in practice Amazon frequently abandoned this model, charging advertisers close to their full winning bid on roughly four out of five occasions for Sponsored Products placements, while applying undisclosed reserve prices that pushed costs higher still. Investigators say the shift was driven by internal dissatisfaction with how much revenue the advertising auctions were generating, effectively tilting the system in Amazon's favour without informing the advertisers bidding into it.
The lawsuit draws on a large cache of internal Amazon communications, some of which are quoted directly despite heavy redaction elsewhere in the filing. One memo cited by regulators reportedly acknowledged that hidden reserve pricing boosted short-term revenue but warned it could damage the company in the long run, and the FTC says several employees raised concerns internally that went unheeded. Regulators further argue that the inflated advertising costs were ultimately passed down the chain to ordinary shoppers through higher retail prices, framing the case as one of consumer harm as well as advertiser deception, and stating that the conduct has continued up to the present day.
Amazon has firmly disputed the regulators' framing, saying the case rests on a small number of documents taken out of context from the roughly 1.5 million pages of material it handed over, and that no evidence of consumer price rises has been produced. The company points to its own figures, saying average winning bids on Sponsored Products search ads fell by around half between 2019 and 2025 and that roughly 92% of ad placements do not go to the highest bidder, arguing advertisers respond to real performance rather than auction mechanics. Amazon's shares fell 2.5% on the day the suit was announced. The case follows the company's $2.5bn settlement last year with the FTC over allegations it enrolled consumers in Prime without clear consent and made cancellation deliberately difficult.
Where outlets differ
Source 1 (drawing on the FTC's own statement) leans heavily on internal memos and employee warnings, framing the case around a deliberate, ongoing 'deception' and quoting Amazon's rebuttal about reviewing 1.5 million pages of documents, but gives no detail on auction mechanics, share price movement or precise advertiser numbers.
Source 2 (BBC) provides far more technical detail on how the alleged scheme worked — explaining second-price auctions and the 80% figure for winning-bid overcharges — and adds market-facing details absent from Source 1, including the 2.5% share price drop, the 'more than a million advertisers' figure, and the link to Amazon's prior $2.5bn Prime settlement.
The two sources give slightly different framings of scale and timing: Source 1 cites 'more than six years' of conduct extracting over $20bn, while Source 2 more specifically dates the alleged scheme to 'since 2019.'
Amazon's rebuttal statistics differ by source: Source 1 emphasises the claim that no evidence of consumer price increases was cited, while Source 2 highlights Amazon's own data on falling average winning bids and the proportion of ads not awarded to the top bidder.
Coverage
- Engadget — Amazon is sued by the FTC and 22 states for ‘secretly’ overcharging advertisers since 2019
- BBC Technology — Amazon rigged billions in ad pricing, lawsuit from states and US watchdog alleges