FTC and 22 States Sue Amazon Over Ad Auction Practices

Higher advertising costs on Amazon may have reached consumers through elevated product prices, according to a lawsuit filed by the Federal Trade Commission and attorneys general from 22 states. The complaint, lodged in U.S. District Court for the Western District of Washington, centers on whether Amazon misled advertisers about the mechanics of its Sponsored Products auctions for more than seven years.

Regulators allege that Amazon told participants the system functioned as a second-price auction, where the winner would pay only a small increment above the next-highest bid. Internal documents cited in the filing describe the actual outcome as closer to a first-price auction, with advertisers charged their full maximum bid nearly 80 percent of the time. The complaint estimates this approach extracted more than $20 billion from advertisers, a figure that could not be independently verified beyond the plaintiffs' assertions, and contends the added expense was passed along to shoppers.

Amazon rejected those characterizations. The company stated that average cost-per-click for Sponsored Products ads remained flat in inflation-adjusted terms from 2019 to 2024, while advertiser return on investment improved. It further noted that ad selection prioritized relevance over bid price 92 percent of the time and that winning bids declined by half between 2019 and 2025. Amazon described the suit as misguided and said the complaint contains no evidence linking its practices to higher consumer prices.

California Attorney General Rob Bonta and FTC Chairman Andrew Ferguson both emphasized the scale of the alleged conduct, pointing to effects on more than 500,000 small and medium-sized businesses. The states involved range from Alaska to Florida. The suit seeks an injunction, damages, and other relief. No trial date has been set.