FTC and States Sue Amazon Over Advertising Practices

The Federal Trade Commission (FTC), along with 22 state attorneys general, has filed a lawsuit against Amazon, alleging the company manipulated its advertising auctions to impose higher charges on advertisers. This, according to the FTC, led to increased costs for consumers.

The lawsuit, submitted to the U.S. District Court for the Western District of Washington, claims that Amazon raked in over $20 billion through undisclosed surcharges on advertisers, a practice that dates back to modifications made to its auction system in 2019. FTC Chairman Andrew Ferguson stated that millions of advertisers on Amazon were misled into spending more on ads, with the higher expenses ultimately affecting consumers adversely, as reported by CNBC.

The complaint suggests that Amazon was aware that these increased advertising costs would compel advertisers to raise the prices for their products on the platform. The FTC argues that Amazon’s undisclosed charges not only enabled the company to gain more from advertisers but also contributed to higher consumer prices.

The focus of the complaint is on ads that appeared next to search results on Amazon.com, including sponsored product, brand, and display ads. The FTC’s case revolves around Amazon’s customary “second-price” auction model, in which advertisers were informed they would pay just the lowest necessary bid to secure an ad placement.

However, the FTC claims that Amazon quietly modified these rules in 2019 by implementing an undisclosed “soft reserve price,” which could elevate the costs advertisers incurred. The agency alleges this adjustment was aimed at boosting advertising revenue and cites internal company communications as evidence.

In response to the lawsuit, Amazon has called the allegations “misguided,” asserting that the FTC misunderstands how advertisers utilize its platform. The company also mentioned that the agency has not provided evidence linking the alleged practices to higher consumer prices.

“We’ve given advertisers clear guidance about our auctions and pricing in the primary tools they use for campaign management,” Amazon stated. The company intends to vigorously defend itself in court, contending that its auction system saved advertisers around $8 billion from 2021 to 2025.

Amazon has established itself as the third-largest digital advertising entity in the world, following Google and Meta. Last year, the company generated upwards of $68 billion in advertising revenue, with a significant portion coming from sponsored product ads.

The FTC and the states involved are pursuing civil penalties, restitution, and additional damages, alleging that Amazon has breached both federal and state consumer protection laws.

This lawsuit is part of the FTC’s ongoing legal challenges against Amazon. The company had previously reached a settlement with the agency for $2.5 billion in 2025 concerning its Prime membership practices and is also facing an antitrust lawsuit from the FTC along with 17 states, accusing it of monopolistic behavior that harms sellers and consumers alike.