FTC and 22 US States Sue Amazon Over Alleged £364 Trillion Ad Price Manipulation
The US Federal Trade Commission (FTC), together with a bipartisan group of 22 states, has officially filed a lawsuit against Amazon. The e-commerce giant is accused of secretly overcharging more than one million of its advertising customers through manipulation of the online auctions used to determine ad prices.
In the lawsuit filed on Monday, the FTC and the states stated that the alleged manipulation scheme has generated profits for the company of up to US$20 billion (approximately Rp364 trillion) since 2019.
“Amazon ignored and replaced the actual auction results with higher prices set by Amazon to increase its profits,” the lawsuit document filed in the company’s home state of Washington reads.
In an official statement to the BBC, Amazon said it “strongly disagrees” with the suggestion that it has misled advertisers and called the lawsuit “misguided.”
In addition to harming advertisers, the FTC, as the US consumer watchdog, and the states believe Amazon consumers have also been harmed because the additional costs are passed back on to buyers.
“Consumers suffer, have suffered, and will continue to suffer substantial financial harm as a result,” the lawsuit document states, which immediately drew a swift rebuttal from Amazon.
“The FTC wants the public to believe this case is about higher prices for consumers. It is not,” Amazon responded in its statement.
Following the announcement of the lawsuit, the company’s shares fell and closed down 2.5% on Monday.
Many brands and sellers compete on Amazon’s e-commerce platform to place Sponsored Product and Sponsored Brands adverts when consumers search for products using certain keywords. The ad placements are then auctioned off to the highest bidder.
The lawsuit accuses Amazon of secretly charging higher fees in auctions known as “second price”. In this auction mechanism, prospective advertisers expect to pay only one cent more than the next highest bidder for each bid they win.
In practice, however, the lawsuit document claims Amazon has charged fees based on the winning bid value of the Sponsored Products advertiser itself in nearly 80% of total opportunities. This practice was triggered because Amazon was “not satisfied with the amount of revenue generated from its advertising auctions.”
Amazon responded to the allegations by stating that the FTC “fundamentally does not understand how advertisers work.”
“Advertisers adjust their bids based on real-world performance, not descriptions of auction mechanics,” Amazon explained in its statement.
“Average winning bids fell 50% from 2019 to 2025 on Sponsored Products search advertising, and around 92% of placed adverts were not awarded to the highest bidder,” the company added.
This is not the first time Amazon has faced the US consumer watchdog. Last year, Amazon agreed to a settlement with the FTC over allegations that it enrolled millions of consumers in its Prime subscription service without their consent, and deliberately made the cancellation process difficult. Amazon settled the case by paying US$2.5 billion, which included civil penalties and consumer redress.