Federal lawsuit accuses Amazon of inflating ad prices for 1 million companies through hidden fees

The Federal Trade Commission (FTC) and a coalition of 22 states filed a joint lawsuit on Monday against Amazon, accusing the e-commerce giant of applying undisclosed surcharges in its advertising auctions within search results.

The lawsuit is supported by the attorneys general of states including Florida, Texas, Indiana, Iowa, North Carolina and New York. Authorities maintain that this opaque practice continued for seven years, affecting more than 1 million brands and independent merchants who use the platform to promote their products.

Discrepancy between promised auction and actual charge

The core of the lawsuit centers on "second-price" auctions, the standard practice in the digital industry where the winning company pays only one cent above the second-highest bid.

According to the FTC's complaint, Amazon assured companies that it operated under this scheme, but allegedly charged winners their maximum bid price in approximately 80% of cases.

"When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering," said FTC Chairman Andrew N. Ferguson.

"Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers."

Internal documents cited in the complaint suggest that company staff were aware that advertisers were bidding based on the traditional second-price model, while the company evaluated price increases in the hope that brands would not reduce their budgets because they would not detect the change.

Amazon rejects lawsuit, defends its efficiency model

Amazon's corporate response was swift. The company called the lawsuit "misguided" and stated that average winning bids for its sponsored ads fell by 50% between 2019 and 2025.

"The FTC's claim fundamentally misunderstands how advertisers operate," the company stated in a press release. "Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics."

The company added that, even under the authorities' premise, it estimates it generated savings of more than $8 billion for advertisers between 2021 and 2025 by prioritizing ad relevancy over bid price.

The coalition of state attorneys general and the FTC is seeking a court order to ban the disputed mechanism, in addition to demanding financial restitution and civil penalties from the platform.