Amazon is one of the biggest digital advertising platforms in the world. Turns out, according to a lawsuit filed Monday by the Federal Trade Commission and 22 states, the company allegedly used its market dominance to repeatedly overcharge advertisers and sellers.
Per the complaint, Amazon has spent the last seven years engaging in what the FTC called “deceptive and unfair practices that secretly inflated prices in its online search advertising auctions.” The issue stemmed from the company’s advertising auction model, which required advertisers to bid for placements on Amazon’s platform, including Sponsored Product ads, Sponsored Brands ads, and Display Ads that appear when a consumer searches for a product using a given keyword on Amazon.
Amazon would sell those placements to the highest bidder, which is fine. But things allegedly went sideways with what the FTC called “second-price” auctions, in which the winner was supposed to pay just one cent more than the next-highest bid, regardless of how much they had offered. The FTC says that Amazon instead charged advertisers their full winning bid about 80% of the time.
The feds present some wild statistics to show just how widespread this issue was. In a press release announcing the lawsuit, the agency claims that Amazon “covertly and substantially increased the prices that more than one million brands and sellers were required to pay to advertise on its platform,” and estimates that Amazon has likely “extracted tens of billions of dollars from its unwitting advertising customers.”
Amazon, as you may expect, denies these accusations. In a blog post, the company said, “The FTC claims advertisers were harmed because they didn’t understand how our auction worked and therefore overpaid. Not only do we properly describe our pricing and auctions to advertisers, but this claim fundamentally misunderstands how advertisers behave. Advertisers adjust bids based on real-world outcomes, not descriptions of auction mechanics.”
The company also offered up some of its own math, claiming that advertisers “saved over $8 billion from 2021 to 2025 as a result of Amazon incorporating ad relevancy into our auction versus selecting ads on bid alone.” How you determine advertisers saved money by spending it is the kind of math that really only works in corporate bookkeeping, but that’s what Amazon is going with.
Regardless, it seems Amazon simply cannot wiggle its way out of regulator crosshairs. The company is already dealing with an antitrust case brought by the FTC in 2023 that is set to go to trial next year, and agreed to a $2.5 billion settlement for deceptive practices related to Amazon Prime.
