The Federal Trade Commission and 22 states filed a lawsuit Monday against Amazon, accusing the e-commerce powerhouse of secretly raising prices in its online search advertising auctions in a scheme regulators say may have cost customers tens of billions of dollars.
According to the complaint, Amazon allegedly used undisclosed surcharges for seven years, driving up the amount more than 1 million brands and third-party sellers had to pay to promote products on the company’s marketplace.
The FTC was joined in the case by the attorneys general of Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont and Washington.
At the heart of the Amazon advertising lawsuit are second-price auctions, a common model in the digital ad industry. Amazon told businesses they would pay only “one cent more” than the next-highest bidder for an advertising keyword, regulators said. But the lawsuit alleges that, roughly 80% of the time, winning advertisers were instead charged their own bid amount.
The FTC and the participating states argue that the practice inflated advertising costs for businesses selling on Amazon’s platform.
“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” FTC Chairman Andrew N. Ferguson said in a statement. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers.”
Amazon rejected the allegations, calling the case “misguided.” The company said average winning bids for sponsored product ads fell by 50% between 2019 and 2025.
“The FTC’s claim fundamentally misunderstands how advertisers operate,” Amazon said in a statement. “Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics.”
Amazon added, “Even accepting the FTC’s flawed premise that advertisers do not adjust bids, we estimate they saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone.”
Internal documents
Internal Amazon documents suggest the retailer was aware that advertisers were bidding based on their belief they were taking part in a true second-price auction, but that employees allegedly discussed raising prices while “hoping that advertisers don’t notice and decrease bids or ad spend,” according to an Amazon executive cited in the FTC’s complaint.
Amazon allegedly tested how much it could increase hidden charges without being detected by advertisers, according to North Carolina Attorney General Jeff Jackson.
“Amazon takes great pains to actively conceal from customers the fact that it inflates its purported auction prices,” the lawsuit alleged. “As Amazon’s confidence that its advertising customers are unaware of its conduct has grown, it has substantially increased its hidden surcharges.”
New York Attorney General Letitia James said in a statement that the FTC and states are seeking a court order to bar Amazon from pursuing the “illegal scheme” and to require the company to pay penalties, restitution and other damages.
Alain Sherter
