In brief
The Federal Trade Commission and a coalition of 22 states have filed a lawsuit against Amazon, accusing the e‑commerce giant of manipulating its sponsored product auctions to overcharge advertisers. The complaint claims Amazon secretly replaced true auction results with higher prices, generating roughly $20 billion since 2019 and pushing extra costs onto shoppers. Amazon denies the allegations, arguing that the FTC misunderstands the auction mechanics and that higher prices were not intentional. The lawsuit has already sent Amazon’s shares down, sparking broader concerns about digital advertising abuses.
By Lily Jamali | North America technology correspondent • 31 August 2026
According to the lawsuit filed on Monday, the alleged scheme has likely netted the firm roughly $20 billion (£14.8 billion) from advertising customers since 2019. The complaint claims that Amazon "overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits."
Amazon responded promptly, saying it "strongly disagrees" with the premise that it misled advertisers and calling the suit "misguided." It further maintained that the FTC "fundamentally misunderstands how advertisers operate," adding that "average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads, and roughly 92% of placed ads are not given to the highest bid."
The lawsuit also argues that the higher charges affect consumers, as the additional costs are passed on to shoppers. "Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result," the complaint states.
Amazon’s share price fell about 2.5% on the day the lawsuit was announced, closing lower on Monday. This legal challenge joins a previous $2.5 billion settlement relating to the company’s Prime subscription practices.
Amazon’s advertising ecosystem relies on sponsored product and branded ads that appear when users search for keywords. These placements are auctioned to the highest bidder, usually using a "second price" model: advertisers are billed the next highest bid plus a small increment. The complaint alleges Amazon instead charges its own winning bid, often as close to 80% as possible, effectively subverting the auction.
While Amazon disputes the allegations, the lawsuit’s claims highlight growing concerns about market dominance and fairness in digital advertising. Whether courts will find Amazon’s tactics unlawful remains to be seen, but the case could set a precedent for future antitrust scrutiny of online marketplaces.
