Amazon has been accused of secretly overcharging more than a million advertising customers by manipulating online auctions.
The lawsuit, filed by the U.S. Federal Trade Commission and a bipartisan group of 22 states, alleges that the company has netted roughly $20 billion from advertising customers since 2019.
The complaint claims Amazon "overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits" in its home state of Washington.
Amazon responded in a statement, saying it "strongly disagrees" with the premise that it misled advertisers and called the suit "misguided."
Citing consumer harm, the complaint says extra costs are passed onto shoppers, leading to "substantial injury" for consumers.
Amazon has countered that the FTC "fundamentally misunderstands how advertisers operate" and that advertisers set bids based on real-world performance, not auction mechanics.
Amazon added 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 claims Amazon charged its Sponsored Products advertisers its own winning bid close to 80% of the time, instead of the expected 'second price' of one cent above the next highest bid.
Amazon attributes its alleged methods to dissatisfaction with the revenue generated by its advertising auctions.
Shares of Amazon fell 2.5% after the announcement of the lawsuit, reflecting investor concern over the potential impact on its bottom line and brand reputation.
Amazon previously settled a separate FTC case in 2025, agreeing to pay $2.5 billion over claims that it tricked Prime customers into subscriptions without their consent and made cancellation difficult.
