Amazon's ad pricing faces legal challenge in the U.S.

The Amazon ad lawsuit has moved to the center of financial markets' attention because of its potential impact on the company’s advertising revenue model and market value. The U.S. Federal Trade Commission (FTC) and 22 states led by both parties have filed suit, alleging that Amazon interfered with online ad auctions and overcharged more than 1 million advertising customers.

According to the case filed in Washington state, the company may have generated around $20 billion in additional revenue since 2019. Regulators argue that the added cost did not stop with advertisers and that some of the burden may have been passed on to consumers through product prices.

The claims center on ad auctions

On Amazon, brands and sellers bid for Sponsored Products and Sponsored Brands placements to stand out when users search. Under normal conditions, these ad slots are allocated through an auction process.

How did the FTC say the mechanism worked?

According to the case file, the problem arose especially in auctions assumed to operate on a “second-price” basis. Advertisers believed that if they won, they would normally pay only 1 cent more than the next-highest bid, but the FTC says Amazon altered the results and charged higher amounts.

The complaint alleges that in Sponsored Products ads, the company charged advertisers roughly 80% of their winning bid. Regulators say this approach was introduced after ad auction revenue was deemed insufficient.

  • The allegations claim more than 1 million advertising customers were affected.
  • The FTC and the states say the extra cost may also have been reflected in consumer prices.

Amazon pushed back, shares fell

Amazon told the BBC that it disagrees with the lawsuit’s core assumptions and described the filing as “misleading.” The company argued that the FTC misunderstood how advertisers operate and said advertisers adjust bids based on actual performance rather than the auction’s definition.

Amazon also said the average winning bid in Sponsored Products search ads fell 50% between 2019 and 2025, and that about 92% of displayed ads did not go to the highest bidder. Even so, markets priced in the legal risk quickly; the company’s shares closed Monday down 2.5% after the announcement.

Earlier FTC case also in the spotlight

The company has previously faced the FTC as well. Last year, Amazon reached a settlement worth $2.5 billion in a case over Prime subscriptions, after allegations that consumers were enrolled without consent and made to face a difficult cancellation process.