Federal Regulators Say Amazon Secretly Overcharged 1.2 Million Advertisers by $20 Billion

Keypoints:

• The FTC and 22 state attorneys general sued Amazon on August 31
• The suit alleges Amazon manipulated ad auctions since 2019, extracting over $20 billion
• Amazon reportedly charged advertisers full maximum bids 80% of the time despite promising second-price auctions
• The complaint targets Sponsored Products, Sponsored Brands, and Sponsored Display ads
• Amazon called the lawsuit "misguided" and says it relies on outdated internal documents

The Federal Trade Commission and 22 state attorneys general sued Amazon on August 31, accusing the company of secretly manipulating its advertising auctions since 2019. The complaint alleges Amazon overcharged roughly 1.2 million advertisers by more than $20 billion through undisclosed surcharges, all tied to a rule change the company made six years ago.

The specific mechanism is what makes this case unusual. The FTC alleges Amazon promised advertisers a standard second-price auction, where the winning bidder pays just above the second-highest bid, but instead charged the full maximum bid 80% of the time. 

That's a meaningfully different claim than a simple pricing dispute, since it centers on Amazon allegedly misrepresenting how its own auction system actually worked, backed by what the complaint describes as internal documents referencing "hidden" "surcharges."

The suit stays narrowly focused too. It targets only three ad products, Sponsored Products, Sponsored Brands, and Sponsored Display, the ads that appear alongside search results on Amazon's marketplace, and doesn't touch any of Amazon's other business lines.

California Attorney General Rob Bonta didn't soften the language at Monday's press conference, saying Amazon "has rigged billions of ad auctions." FTC Chairman Andrew Ferguson added that the inflated costs "were largely passed on to American consumers," tying the case directly to everyday prices rather than framing it as a dispute between Amazon and its business customers alone. 

Worth noting, this is a Trump administration FTC action, an agency that has generally taken a more restrained approach toward major tech companies than its predecessor, which makes the bipartisan, 22-state coalition joining it a signal that regulators found the underlying conduct hard to ignore. 

Amazon pushed back in a company blog post, calling the complaint "misguided" and arguing regulators cherry-picked a narrow set of internal documents while ignoring that average cost-per-click for advertisers stayed flat between 2019 and 2024. Amazon shares fell 2.7% following the filing.