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The US Federal Trade Commission (FTC) and a bipartisan group of 22 states has filed a lawsuit alleging Amazon secretly overcharged more than a million advertising customers by manipulating online auctions it uses to set ad prices.<\/b><\/p>\n
The FTC and states say in their lawsuit filed Monday that the alleged scheme has likely netted the company $20bn from advertising customers since 2019.<\/p>\n
“Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits,” says a complaint filed in the company’s home state of Washington.<\/p>\n
In a statement to the BBC, Amazon “strongly disagrees” with the premise that it misled advertisers and called the suit “misguided.”<\/p>\n
In addition to advertisers, the FTC, a US consumer watchdog, and the states say Amazon customers have also been harmed as extra costs are passed onto shoppers.<\/p>\n
“Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result,” the complaint states, prompting swift pushback from Amazon.<\/p>\n
“The FTC wants the public to believe this case is about higher prices for consumers. It is not,” Amazon said in its statement.<\/p>\n
The company’s shares fell following the announcement of the lawsuit, closing 2.5% lower on Monday.<\/p>\n
Many brands and sellers compete on Amazon to place Sponsored Product ads and Sponsored Brands ads when consumer search for products using keywords on Amazon’s e-commerce platform.<\/p>\n
Those placements are then auctioned off to the highest bidder.<\/p>\n
The complaint accuses Amazon of secretly charging advertisers more in so-called “second price” auctions, whereby prospective advertisers expect to pay one cent more than the next highest bidder for each bid they win.<\/p>\n
But in practice, the complaint alleges, Amazon has charged its Sponsored Products advertisers their own winning bid close to 80% of the time.<\/p>\n
The lawsuit states that Amazon’s methods were spurred because “it was unhappy about how much revenue its advertising auctions were generating”. <\/p>\n
Amazon responded by saying the FTC “fundamentally misunderstands how advertisers operate”. <\/p>\n
“Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics,” Amazon said in its statement.<\/p>\n
“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,” the company added.<\/p>\n
Amazon has tangled with the consumer watchdog in the past.<\/p>\n
Last year, it settled a case with the FTC that alleged that it enrolled millions of consumers in its Prime subscription offering without their consent, and knowingly made it difficult for consumers to cancel.<\/p>\n
Amazon settled the case for $2.5bn, including civil penalties and consumer refunds.<\/p>\n<\/div>\n