Amazon faces a major lawsuit from the US Federal Trade Commission and multiple states over claims it systematically overcharged advertisers by secretly increasing ad auction prices, a practice that may have led to higher costs for consumers.
- Amazon accused of secretly inflating ad auction prices since 2019
- FTC and 22 states claim over $20 billion extracted unlawfully from advertisers
- Amazon disputes claims, citing a 50% drop in average ad bid prices
What happened
The US Federal Trade Commission together with 22 state attorneys general filed a lawsuit against Amazon, alleging the company has been surreptitiously increasing prices for advertising placements on its platform through a so-called "secret ad surcharge." According to the complaint, Amazon’s internal team manipulated the mechanics of its ad auction system, setting higher prices than those determined by actual bidding.
Specifically, the FTC claims that Amazon replaced the auction’s second-place bid price with a calculated proxy price that was higher to maximize revenue. This practice dates back to 2019 and, according to the regulator, has resulted in more than $20 billion being unlawfully extracted from advertisers using Amazon’s ad services. The suit contends this violates the FTC Act and multiple state laws.
Why it matters
This lawsuit marks a significant escalation in regulatory scrutiny of Amazon’s advertising business, following a recent $2.5 billion FTC settlement over its Prime subscription policies. Advertising on Amazon is critical to many brands looking to reach customers, and inflated ad costs could diminish campaign effectiveness and raise prices for end consumers.
The FTC chair emphasizes the impact extending beyond advertisers, stating that these higher advertising costs were largely passed through to American consumers. If proven, these practices could reshape how Amazon and other platforms structure their ad auctions and pricing models amid growing concerns about transparency and fair competition in digital marketing.
What to watch next
The legal proceedings will unfold over time, potentially setting precedent for oversight of platform advertising auctions. Observers will look for how courts assess the evidence around Amazon’s pricing tactics and whether regulators demand changes to auction transparency and pricing mechanisms.
Amazon has pushed back on the claims, arguing that average winning bids for sponsored product search ads have fallen by half from 2019 to 2024. The company’s response and the larger market reaction will be key indicators of how this dispute may influence future digital advertising policies and platform economics.