According to a lawsuit filed by the U.S. Federal Trade Commission and a bipartisan coalition of 22 states, Amazon secretly overcharged advertisers by manipulating the ad auction system it uses to set Sponsored Product and Sponsored Brands rates. The complaint claims the scheme has produced roughly $20 bn in extra revenue since 2019.
Amazon’s answer was swift: it "strongly disagrees" with the allegations and called the case "misguided." It stressed that the auction procedure is transparent and that it does not override real‑time bid results. The firm also argued that advertisers use performance data—not theoretical auction mechanics—to set bids.
The lawsuit points out that during a second‑price auction, a winner is expected to pay only one cent more than the next highest bidder. The complaint alleges Amazon has instead charged advertisers almost accordingly to their winning bid in almost 80% of cases, eroding the fairness of the exchange and inflating costs that ultimately reach shoppers.
Adding a broader consumer impact, the FTC says shoppers are harmed because the additional charge is passed onto product prices. Amazon’s stock fell 2.5% as investors reacted to the claim. This action follows a prior $2.5 bn settlement with the FTC over alleged deceptive Prime subscription practices.
The lawsuit will test whether Amazon’s advertising platform violates U.S. antitrust and consumer‑protection laws, and whether the company’s market power in e‑commerce has allowed it to profit at the expense of advertisers and consumers alike.
