The Federal Trade Commission (FTC) and 22 states have accused Amazon of deceiving businesses by allegedly increasing advertising costs on its retail platform without advertisers’ knowledge, potentially generating billions of dollars in additional revenue for the company.
The lawsuit claims that approximately 1.2 million advertisers paid more than expected because Amazon manipulated its advertising auction system by raising the minimum prices required to place ads.
FTC Accuses Amazon of Manipulating Ad Auctions
Amazon’s advertising platform uses an auction-based system where businesses compete for ad placements across its marketplace. Under standard auction practices, the winning advertiser typically pays slightly more than the second-highest bid.
However, the FTC alleges that Amazon began secretly modifying auction results in 2018 by adding hidden surcharges and artificial bids that increased advertising costs.
The agency claims Amazon “likely illegally extracted over $20 billion” from advertisers, including nearly half who were small or medium-sized businesses. According to regulators, those increased advertising expenses were ultimately passed on to consumers through higher product prices.
Amazon Rejects FTC Allegations
Amazon strongly rejected the claims, arguing that the lawsuit misunderstands how advertisers manage their campaigns and optimize their bids.
The company said advertisers adjust their bids based on campaign performance rather than auction mechanics alone. Amazon also argued that prioritizing ad relevance instead of simply selecting ads based on bid price helped advertisers save billions of dollars between 2021 and 2025.
The company stated that it has provided information to the FTC multiple times and accused the agency of focusing more on securing a financial penalty than reviewing the facts of the case.
Amazon’s Growing Role in Digital Advertising
Amazon has become one of the largest digital advertising platforms in the United States, competing with major players such as Google and Meta. Its advertising business has grown alongside the expansion of ecommerce, giving brands access to consumers directly at the point of purchase.
Experts note that auction-based advertising depends heavily on platforms maintaining transparency and following established rules. However, advertisers face a challenge because Amazon remains one of the most important marketplaces for reaching online shoppers.
With hundreds of billions of dollars in ecommerce sales flowing through the platform, many businesses consider advertising on Amazon essential despite concerns over pricing and competition.
FTC and Amazon’s Previous Legal Battles
The latest lawsuit represents another major legal challenge between Amazon and federal regulators.
In 2025, Amazon reached a $2.5 billion settlement with the FTC over allegations that the company misled consumers into signing up for Prime subscriptions and made cancellation difficult. The agreement included a $1 billion civil penalty and $1.5 billion in customer refunds.
Amazon also previously settled FTC claims related to privacy violations involving its Alexa voice assistant and Ring security cameras. The company denied wrongdoing in both cases.