Legal/Law/Criminal Justice and Reform

FTC And States Hit Amazon With Lawsuit, Allege Company Gouged Advertisers Leading To Higher Prices For Consumers

Amazon_headquarters_Seattle | Circa March 2013 | By Adbar [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], from Wikimedia Commons

The Federal Trade Commission (FTC) and 22 state attorneys general sued Amazon Monday, accusing the e-commerce giant of manipulating its advertising auctions to secretly charge advertisers higher prices, costs the agency alleges were passed on to consumers through higher prices.

The lawsuit, filed in the U.S. District Court for the Western District of Washington, alleged Amazon collected more than $20 billion through undisclosed surcharges imposed on advertisers dating back to changes the company made to its auction system in 2019. FTC Chairman Andrew Ferguson said millions of Amazon advertisers were misled into paying more for ads, with the increased costs ultimately being passed on to consumers, CNBC reported.

The complaint alleged Amazon knew advertisers would respond to higher advertising costs by increasing the prices of the products they sold on the platform. According to the FTC, Amazon’s undisclosed charges therefore allowed the company to extract more money from advertisers while contributing to higher prices paid by consumers.

The complaint focused on advertisements that appeared alongside search results on Amazon.com, including sponsored product, brand and display ads. The FTC’s case centers on Amazon’s traditional “second-price” auction model, under which advertisers were told they would pay only the minimum amount necessary to win an ad placement.

According to the FTC, Amazon quietly altered those rules in 2019 by introducing an undisclosed “soft reserve price” that could push up the amount advertisers paid. The agency alleges the change was made because Amazon wanted to increase advertising revenue and cites internal communications involving company executives.

Amazon pushed back against the allegations, calling the lawsuit “misguided” and arguing that the FTC does not understand how advertisers use its platform. The company also said the agency had not provided evidence showing that the alleged advertising practices resulted in higher prices for consumers.

“We’ve provided advertisers with guidance about our auctions and pricing in the main tools they use to manage their campaigns,” Amazon said in a statement. The company said it planned to defend itself in court and argued that its auction system saved advertisers roughly $8 billion between 2021 and 2025.

Amazon built the world’s third-largest digital advertising business, behind Google and Meta. The company generated more than $68 billion in advertising revenue last year, with sponsored product ads accounting for most of that total.

The FTC and the states were seeking civil penalties, restitution and other damages, alleging Amazon violated federal and state consumer protection laws, according to the complaint.

The case adds to the FTC’s growing legal pressure on Amazon. The company reached a $2.5 billion settlement with the agency in 2025 over its Prime membership practices and was separately facing an antitrust lawsuit from the FTC and 17 states accusing it of using monopoly power to harm sellers and consumers.