Amazon accused of manipulating ad auctions in multi-state lawsuit

The United States Federal Trade Commission and a bipartisan coalition of 22 states have initiated legal proceedings against Amazon, alleging that the technology giant secretly overcharged more than one million advertising customers. The complaint, filed in the company’s home state of Washington, asserts that Amazon manipulated the online auctions used to determine advertising prices. The regulators claim this alleged scheme generated approximately $20 billion in revenue from advertisers since 2019. The lawsuit contends that the company replaced actual auction results with higher, internally set prices to boost its own profits, a practice that allegedly harmed both advertisers and end consumers by passing on additional costs.

Amazon has firmly rejected the accusations, stating in a response that it strongly disagrees with the premise that it misled advertisers. The company described the lawsuit as misguided and argued that the FTC is misrepresenting the nature of the case. Amazon maintains that the issue is not about higher prices for consumers but rather a fundamental misunderstanding of how advertisers operate. The company noted that advertisers adjust their bids based on real-world performance rather than theoretical descriptions of auction mechanics. Furthermore, Amazon highlighted that average winning bids for Sponsored Products search ads fell by 50 percent between 2019 and 2025, and that roughly 92 percent of placed ads were not awarded to the highest bidder, contradicting the narrative of systematic overcharging.

The legal action centres on Amazon’s Sponsored Product and Sponsored Brands advertising placements, which are typically auctioned to the highest bidder. In standard second-price auctions, advertisers expect to pay one cent more than the next highest bid. However, the complaint alleges that Amazon charged advertisers their own winning bid close to 80 percent of the time. The lawsuit suggests these methods were adopted because the company was dissatisfied with the revenue generated by its advertising auctions. Following the announcement, Amazon shares closed 2.5 percent lower on Monday. This dispute follows a previous settlement last year in which Amazon agreed to pay $2.5 billion to resolve claims that it enrolled millions of consumers in its Prime subscription without consent and made cancellation difficult.