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Ad auctions are at the center of the case

A new Amazon ad pricing dispute in the U.S. has gone to court. The Federal Trade Commission (FTC) and 22 bipartisan states have filed a lawsuit in Washington state, accusing the company of secretly interfering with the results of its ad auctions and overcharging more than 1 million advertising customers.

According to the complaint, Amazon has generated about $20 billion from the practice since 2019. Regulators argue that the extra costs passed on to advertisers could eventually be reflected in product prices and affect consumers as well.

What method is the company accused of using?

The filing says Amazon’s Sponsored Products and Sponsored Brands ad placements are allocated through auctions based on keyword searches. Under a “second-price” model, advertisers would normally expect to pay only $0.01 above the second-highest bid when they win.

  • According to the lawsuit, Amazon invalidated auction results and put higher prices into effect.
  • The complaint alleges that in Sponsored Products ads, winning bidders were charged roughly 80% of their own bid amounts.

Regulators say the approach was introduced after the company decided its ad auction revenue was not high enough.

Amazon rejects the claims, shares fall

Amazon told the BBC that it does not accept the allegations and described the lawsuit as “misguided.” The company said the FTC fundamentally misunderstands how advertisers behave.

According to Amazon, advertisers set their bids based on real-world performance rather than the theoretical mechanics of the auction system. The company also said average winning bids in Sponsored Products search ads fell 50% between 2019 and 2025, and that about 92% of ads shown did not go to the highest bidder.

After the lawsuit was announced, Amazon shares closed down 2.5% on Monday. The move underscored how the legal risk is affecting not only the company’s reputation but also short-term market pricing.

Amazon previously reached a settlement with the FTC

Amazon has also faced the FTC in another case in recent years. Last year, the company agreed to pay $2.5 billion to settle allegations that it enrolled millions of consumers in Prime without their consent and made it difficult to cancel memberships.

The new case suggests scrutiny of Amazon’s ad business could intensify further. How the process ends will be closely watched for its implications for both the company’s ad revenue and seller costs on the e-commerce platform.

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