A major new legal challenge has been brought against e-commerce and tech giant Amazon, as the U.S. Federal Trade Commission (FTC) joined by a bipartisan coalition of 22 states has filed an antitrust and consumer fraud lawsuit accusing the company of systematically inflating advertising costs for millions of sellers through manipulated auction processes. The legal action, lodged Monday in Washington state—the company’s home jurisdiction—lays out claims that the alleged hidden scheme has siphoned an estimated $20 billion in improper revenue from advertising clients since 2019, harming both sellers and everyday consumers in the process.
At the core of the complaint is an allegation that Amazon intentionally overrides legitimate auction results for its high-demand ad placements to impose higher prices than what sellers would otherwise pay. On Amazon’s platform, thousands of brands and third-party sellers compete for prime Sponsored Product and Sponsored Brands ad slots, which appear when users search for specific product keywords. These slots are marketed to sellers as “second-price” auctions, where winners only pay one cent more than the second-highest bid. According to the lawsuit, however, Amazon secretly overrides this rule nearly 80% of the time for Sponsored Product ads, instead charging winning advertisers their full bid amount—a move that directly boosts the company’s bottom line at sellers’ expense.
The complaint notes that Amazon implemented this opaque practice because corporate leadership was dissatisfied with the revenue the ad auctions were originally generating. Beyond harming advertising clients, the FTC and states argue that ordinary Amazon shoppers also bear the cost of these overcharges, as sellers pass inflated ad expenses through to retail prices. “Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result of Amazon’s unlawful conduct,” the complaint reads.
In an immediate response to the lawsuit, Amazon pushed back hard against the allegations, saying it “strongly disagrees” with the claims and calling the legal action “misguided.” The company rejected the FTC’s framing that the case impacts consumer prices, arguing that regulators have “fundamentally misunderstands how advertisers operate.” Amazon noted that advertisers regularly adjust their bids based on real campaign performance, not technical descriptions of auction rules. The company also released counter-data showing that average winning bids for Sponsored Products search ads dropped by 50% between 2019 and 2025, and that approximately 92% of ad placements are not awarded to the highest bidder.
News of the lawsuit triggered an immediate market reaction, with Amazon’s share price closing 2.5% lower on the day of the announcement. This is not the first high-profile clash between Amazon and the FTC: just last year, the company paid a $2.5 billion settlement to resolve another case brought by the regulator, which accused Amazon of enrolling millions of users in its Prime subscription service without explicit consent and deliberately creating barriers to easy cancellation. The $2.5 billion settlement covered both civil penalties and refunds for harmed consumers.
The latest lawsuit marks a continued escalation of U.S. regulatory scrutiny of big tech platforms, particularly their growing advertising businesses that have become major profit drivers for companies like Amazon, Google and Meta. As the legal process moves forward, the case will test how courts interpret fair business practices for digital advertising marketplaces that serve millions of small and large businesses alike.