Amazon.com Inc. (NASDAQ:AMZN) faces a new federal lawsuit after the Federal Trade Commission and 22 states accused the company of secretly manipulating advertising auctions and extracting more than $20 billion from over 1.2 million advertisers.
FTC Details Alleged Amazon Auction Manipulation
The FTC filed the case Monday in federal court in Washington state, alleging Amazon misrepresented how it priced Sponsored Products and other ads. Regulators said more than 500,000 small- and medium-sized businesses were among those affected.
Amazon publicly described its system as a "second price" auction, where a winner would pay only slightly more than the next-highest bid. The FTC alleges Amazon instead introduced undisclosed "soft reserve prices" beginning in 2019 and used what internal documents called an "invented auction participant" to push prices higher.
The agency said Sponsored Products advertisers paid their full bid roughly 30% to 40% of the time in 2021, 70% in 2022 and about 80% by 2024. FTC Chair Andrew Ferguson said, "Amazon has millions of advertising customers who were misled into paying significantly higher prices."
Lawsuit Adds To Amazon’s Regulatory Battles
The case adds another front to Amazon’s regulatory battles. The FTC and states previously sued Amazon in 2023 over alleged marketplace monopolization, while an unsealed version of that complaint highlighted the company’s "Project Nessie" pricing algorithm. Amazon later agreed to a $2.5 billion settlement over separate allegations involving Prime enrollment and cancellation practices.
Advertising has become a major profit engine for Amazon. The company generated $68.6 billion in advertising sales in 2025, making it the world’s third-largest digital advertising platform behind Alphabet Inc. (NASDAQ:GOOG)(NASDAQ:GOOGL) and Meta Platforms Inc. (NASDAQ:META).
Amazon Rejects Claims As FTC Seeks Relief
Amazon, in a public press release on Monday, revealed that it "strongly disagrees" with the latest allegations and said "the FTC’s claim fundamentally misunderstands how advertisers operate."
It also said average cost-per-click for “Sponsored Products” remained flat after inflation from 2019 through 2024, while conversion rates for individual Sponsored Products advertisers rose more than 24% from 2021 to 2025. Amazon also said average winning bids fell 50% from 2019 to 2025 and estimated its relevance-focused auction model saved advertisers more than $8 billion between 2021 and 2025.
The FTC is seeking monetary relief, civil penalties and an injunction against the alleged practices.
Price Action: AMZN stock was trading 0.53% lower at $258.40 in pre-market trading on Tuesday.
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