The US Federal Trade Commission (FTC) and a bipartisan coalition of 22 states filed a lawsuit against Amazon on August 31, 2026. They accused the company of secretly manipulating its digital advertising auction system to overcharge roughly 1.2 million advertisers by more than $20 billion since 2018 or 2019 [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11].
The suit alleges Amazon altered the "second price auction" system by submitting its own bids to inflate prices. About 80% of the time, advertisers were charged close to Amazon’s own winning bid rather than the next-highest bid, leading to inflated costs [1, 2, 9, 10, 11]. These manipulations targeted Sponsored Products, Sponsored Brands, and Sponsored Display ads on Amazon’s platform [2, 5, 6, 9, 10, 11].
The FTC and states say Amazon concealed these changes from advertising customers and took active steps to hide the manipulation [2, 5, 6, 10, 11]. They argue that higher ad costs pushed up product prices on Amazon, such as groceries and electronics, ultimately harming consumers [1, 2, 5, 9, 10, 11].
Amazon denied wrongdoing, calling the lawsuit misguided and flawed. The company said average ad costs per click remained roughly flat from 2019 to 2024 and disputed claims that the alleged conduct caused consumer harm. "Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics," Amazon said. It added, "The FTC wants the public to believe this case is about higher prices for consumers. It is not" [1, 2, 5, 6, 8, 10, 11].
Amazon’s advertising revenue surpassed $68 billion in 2025, making it the third-largest digital ad platform behind Google and Meta. That year, Amazon’s total revenue approached $717 billion [3, 5, 6, 8, 11]. Following news of the lawsuit, Amazon’s stock dropped 2.5% on August 31 [1, 5, 6, 8, 11].
The case is the FTC’s third major legal action against Amazon. In September 2025, Amazon agreed to pay $2.5 billion to settle a separate FTC claim over deceptive Prime subscription practices. Another trial is scheduled for early 2027, alleging Amazon illegally maintains an online retail monopoly [3, 4, 5, 6, 7, 8, 11].
The FTC and states intend to seek civil penalties and billions in damages from Amazon [2, 3, 5, 6, 8, 10, 11]. The lawsuit also highlights how Amazon reportedly raised cost-per-click prices by up to 50% on key shopping days by changing auction rules to intervene in ad auctions starting in 2018 or 2019 [1, 3, 4, 6, 10]. Over 500,000 small and medium-sized businesses are among the affected advertisers [9, 10].
California Attorney General Rob Bonta said, "Amazon has rigged billions of ad auctions" and called their practice "simply illegal" [8, 10]. Some advertisers expressed surprise but acknowledged Amazon’s scale and effectiveness remain unmatched for sellers focused on driving sales [3, 4].
