The company’s shares reportedly fell 2.5 per cent after the lawsuit was announced.
US consumer watchdog, Federal Trade Commission (FTC), and a group of 22 US states filed a lawsuit against Amazon on Monday, accusing the company of overcharging its advertising customers by manipulating the online auctions that set ad prices. The company’s shares reportedly fell 2.5 per cent after the lawsuit was announced. Amazon has gained nearly $20 billion from over a million advertising customers since 2019, the FTC and states allege in the lawsuit.
“Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits, according to a filed complaint reported by the BBC.
“Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result”, it said. It is not,” Amazon said in its statement. In a statement to the BBC, the company said it “strongly disagrees” with the premise of the lawsuit and called it “misguided”.
“The FTC wants the public to believe this case is about higher prices for consumers. The FTC and the states also alleged that Amazon’s practices have harmed consumers, as the additional advertising costs are ultimately passed on to shoppers.
However, the complaint alleges that Amazon charged Sponsored Products advertisers their own winning bid nearly 80 per cent of the time. Amazon added that average winning bids fell 50 per cent between 2019 and 2025 for Sponsored Products search ads. It also said roughly 92 per cent of placed ads are not awarded to the highest bidder. Amazon agreed to pay $2.5 billion to settle the case, including civil penalties and refunds to consumers.
The complaint alleges that Amazon secretly charged advertisers more through so-called “second price” auctions. The lawsuit said Amazon’s practices were driven by its dissatisfaction with the revenue generated through its advertising auctions. Amazon said the FTC “fundamentally misunderstands how advertisers operate”. “Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics,” the company said.
Under this system, advertisers expect to pay one cent more than the next-highest bidder for each auction they win. Notably, Amazon has faced legal action from the FTC in the past. Catch the latest World News and Live updates. Download the TOI app.
Last year, the company settled a case brought by the FTC, which alleged that it had enrolled millions of consumers in its Prime subscription service without their consent and knowingly made it difficult for them to cancel.
On Amazon’s e-commerce platform, brands and sellers compete to place Sponsored Product and Sponsored Brands ads when consumers search for products using keywords. These ad placements are then auctioned to the highest bidder.