Amazon Faces FTC, State Suit Over Alleged Advertising Price Manipulation

The lawsuit, filed Monday in federal court in Washington state, accuses Amazon of manipulating its advertising auctions by effectively raising the minimum amount businesses had to pay for placements, according to Reuters. The FTC alleges the practice caused advertisers at least $20 billion in additional costs.

According to Reuters’ report on the lawsuit, the regulator said Amazon systematically increased auction prices without adequately informing advertisers. A bipartisan group of states joined the federal agency in the case, which seeks remedies that could include civil penalties and the recovery of money for affected businesses.

The case targets a lucrative part of Amazon’s sprawling e-commerce operation. Merchants and brands pay the company to promote products to shoppers searching its website and app, giving Amazon control over both a major retail marketplace and an increasingly important channel through which sellers compete for customers.

The FTC’s complaint alleges Amazon altered the mechanics of those advertising auctions while advertisers continued to operate under the impression that prices were being determined through a conventional second-price auction. The regulator said Amazon introduced an undisclosed mechanism beginning in 2019 that could push the amount paid by a winning advertiser above what ordinary competition among bidders would otherwise have produced.

The government alleges the changes ultimately generated billions of dollars for Amazon at advertisers’ expense. The FTC said the practices affected more than 1 million brands and sellers over a period of years, including hundreds of thousands of small and midsize businesses. Those allegations haven’t been proven in court.

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Amazon rejected the government’s claims. According to Reuters, the company said its advertising policies are designed to present shoppers with relevant promotions and argued that advertisers have received increasing value from the platform. Amazon said average advertising cost per click was essentially unchanged between 2019 and 2024 even as sales generated from those clicks increased.

The company also disputed the suggestion that its practices harmed consumers, saying its pricing strategy is focused on keeping retail and grocery prices competitive with other sellers, Reuters reported.

The legal challenge adds to Amazon’s history of clashes with the FTC. In September 2025, the company agreed to pay $2.5 billion in penalties and reimbursements to resolve allegations that it misled customers in connection with Prime subscriptions, according to Reuters.

The latest case is pending in the U.S. District Court for the Western District of Washington, according to the FTC. The agency and participating states are seeking monetary relief as well as an order stopping the practices challenged in the complaint.

Investors reacted negatively to the new regulatory threat. Amazon shares were down about 3% in afternoon trading Monday, Reuters reported.

The lawsuit puts fresh scrutiny on the economics of Amazon’s advertising marketplace and on the information available to merchants bidding for visibility on the company’s storefront. Its outcome could determine whether Amazon faces significant repayments to advertisers and restrictions on how it sets prices in future advertising auctions.

Source: Reuters