The US Federal Trade Commission (FTC), joined by 22 US states, has sued Amazon.com, alleging the e-commerce giant systematically overcharged advertisers by secretly inflating prices in its advertising auctions.
The lawsuit, filed on Monday (August 31) in federal court in Seattle, claims Amazon since 2019 has “secretly and systematically overcharged” about 1.2 million advertising customers.
The FTC and state attorneys general allege the company failed to adequately disclose how it set prices for sponsored listings that appear prominently when shoppers search Amazon's marketplace.
According to the complaint, Amazon secretly raised auction prices for three advertising products — Sponsored Products, Sponsored Brands and Sponsored Display. The FTC estimates the alleged conduct cost advertisers $20 billion or more, generating billions of dollars in additional profits for Amazon at their expense.
The agency said advertisers were not sufficiently informed about the pricing and terms governing the auctions. The 22 states involved in the case could seek civil penalties and attempt to recover some of the alleged damages.
Amazon rejects FTC allegations
Amazon has denied the allegations, arguing that the lawsuit misunderstands how its advertising auctions work.
The company said its auctions prioritize the relevance of products to shoppers' search terms before considering advertisers' bids. Amazon argued that this system helps consumers find relevant products while keeping advertising costs competitive.
Amazon also said the average cost-per-click for its search ads remained flat after adjusting for inflation between 2019 and 2024, while sales generated through those clicks increased. The company further claimed its auction system saved advertisers $8 billion over the five years through 2025.
Amazon said the FTC had provided no evidence that its advertising practices harmed shoppers or that advertisers were improperly charged.
Latest legal clash with FTC
The lawsuit marks the latest legal battle between Amazon and the FTC, which has scrutinized the company's business practices for years.
Amazon also faces another major antitrust case brought by the FTC over allegations that it illegally maintains a monopoly in online retail markets. A trial in that case is scheduled for early next year.
