US States and FTC Sue Amazon Over Alleged Ad Price Rigging
The FTC and 22 states filed a lawsuit against Amazon, alleging rigged online ad auctions that have generated over $20bn since 2019.
Stock photo for illustration only, not from the actual event
- The FTC and 22 states filed a lawsuit against Amazon over online ad auctions.
- The complaint alleges the scheme generated over $20bn since 2019.
- Extra costs from advertising are reportedly passed down to everyday shoppers.
- Amazon shares dropped 2.5% following the announcement of the lawsuit.
The U.S. Federal Trade Commission (FTC) alongside a bipartisan coalition of 22 state attorneys general has filed a lawsuit against Amazon, accusing the tech giant of secretly overcharging more than one million advertising customers through manipulated online auctions.
According to the lawsuit filed on Monday, the alleged auction-rigging scheme has likely netted the company upwards of $20 billion from advertising customers since 2019. Beyond the direct impact on brands and third-party sellers, the consumer watchdog and states argue that these extra costs ultimately trickle down to shoppers in the form of higher retail prices.
The FTC emphasized that consumers are suffering and will continue to face substantial financial injury as a direct result of these practices. Amazon swiftly pushed back against the allegations, stating that the regulatory agency wants the public to falsely believe the case is centered on consumer prices rather than ad mechanics. Following the announcement, Amazon shares fell, closing 2.5% lower on Monday.
Third-party brands and sellers heavily compete on the e-commerce platform to secure Sponsored Products and Sponsored Brands placements when users search using keywords. These coveted placements are traditionally auctioned off to the highest bidder through standard bidding mechanisms.
Stock photo for illustration only, not from the actual event
However, the legal complaint accuses Amazon of secretly charging advertisers more in simulated "second price" auctions—where bidders normally expect to pay just one cent more than the runner-up. In practice, the filing alleges that Amazon has charged advertisers their full winning bid nearly 80% of the time. Amazon responded by stating that the FTC fundamentally misunderstands advertiser behavior, noting that businesses adjust bids based on real-world performance rather than auction rules.
"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
This legal battle marks another chapter in ongoing tensions between Amazon and the consumer watchdog. Last year, the company settled a major case with the FTC over allegations that it automatically enrolled millions of users into its Prime subscription without explicit consent and intentionally made cancellations difficult. That settlement cost Amazon $2.5 billion in civil penalties and consumer refunds.
The FTC's aggressive scrutiny into Amazon's advertising backend highlights a broader regulatory shift toward investigating algorithmic transparency and hidden platform fees within Big Tech companies. While antitrust cases traditionally focused on marketplace dominance, scrutinizing ad auction mechanics targets the foundational revenue engines that fund these ecosystems, setting a critical legal precedent for digital marketplace fairness.
Source: BBC Business
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