The Federal Trade Commission and a bipartisan coalition of 22 states filed suit in Washington on Monday accusing Amazon of extracting roughly $20 billion from more than a million advertisers since 2019 by secretly overriding its own auction results. The complaint alleges the company replaced genuine second-price outcomes with the advertisers' own higher bids close to 80 percent of the time on Sponsored Products placements.
The mechanism in question
The lawsuit targets the auction logic underpinning Sponsored Products and Sponsored Brands ads, where brands bid on keywords to appear in search results. In a standard second-price auction the winner pays one cent above the next highest bid. The complaint says Amazon instead charged the winner's full bid in the vast majority of transactions, a deviation the enforcers characterize as a deliberate revenue push after the company grew unhappy with auction yields.
Amazon's defense
Amazon rejected the premise in a statement, arguing the FTC misunderstands how advertisers actually behave. The company said bidders adjust based on performance data, not auction mechanics, and cited a 50 percent decline in average winning bids on Sponsored Products search ads between 2019 and 2025. It also noted that roughly 92 percent of placed ads are not awarded to the highest bidder, a figure the complaint does not address.
Consumer harm and precedent
The enforcers contend the overcharges flow through to shoppers in the form of higher retail prices, an injury Amazon dismisses as a distraction. The case lands a year after Amazon settled a separate FTC action over Prime enrollment practices for $2.5 billion in penalties and refunds. Shares closed 2.5 percent lower on Monday.
What to watch
The complaint seeks unspecified civil penalties and injunctive relief. A court will have to decide whether the auction design constitutes deception or simply a pricing model the platform is entitled to run. The 80 percent charge rate and the $20 billion damage estimate will be the central factual disputes.