Amazon sued by US Federal Trade Commission, 22 states over ad sales practices

AMAZON illegally raised prices for advertisers by surreptitiously raising the minimum price required to place ads that promote their products, the US Federal Trade Commission alleged in a lawsuit filed in federal court on Monday (Aug 31).

The agency, joined by a bipartisan group of 22 US states, said Amazon systematically inflated auction prices for advertisers without their knowledge, costing them US$20 billion or more.

“Amazon has been able to generate billions of dollars in profits — at the expense of its auction advertising customers,” the FTC stated in its suit, filed in federal court in the Western District of Washington state.

Advertisers suffered billions of dollars in harm from higher ad prices, while the states could seek civil penalties and attempt to recover some of that money, the FTC alleged.

The agency will seek “tens of billions” in damages, according to an official, though a precise amount has not yet been settled.

Amazon, in a blog post on Monday, denied wrongdoing, saying its advertising policies aim to show shoppers the most relevant ads, adding that the average cost per click for advertisers remained flat from 2019 to 2024, while the sales generated from those clicks rose.

“Amazon’s approach to pricing contradicts any suggestion of consumer harm,” the company said. “We provide customers the lowest prices every day across the widest selection of products, and work to ensure our retail and grocery prices meet or beat those offered by other retailers.”

The suit centres on three types of advertisements that run alongside search results: sponsored products, brand and display ads.

The FTC’s allegations date to change in Amazon’s auction rules from 2019. Online ad auctions occur in the fractions of a second typically after a search term is entered, with marketers’ computer systems bidding for the right to have their messaging appear.

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According to the FTC, Amazon sometimes entered its own bids in the auctions, ostensibly raising prices for others. As part of the scheme, it attempted to conceal those bids from the advertisers, the FTC alleged.

Due to the higher cost of advertising, consumers paid higher prices for the companies’ goods on the Amazon, the FTC alleged. As much as 80 per cent of sponsored products auctions had some form of intervention by Amazon, according to the complaint.

Amazon, based in Seattle, said it actually reduced costs for advertisers, saving them some US$8 billion between 2021 and 2025, according to the blog post. “Average winning bids fell 50 per cent from 2019 to 2025 on sponsored products search ads,” Amazon said.

The retail giant has been aggressively boosting its advertising business and is now the world’s third largest digital ad company after Google and Meta. The company’s ad sales rose 26 per cent in this year’s second quarter to US$19.8 billion and 22 per cent in all of 2025 to US$68.6 billion.

The e-commerce giant in September last year agreed to pay US$2.5 billion in fines and reimbursements to Prime subscribers to settle the FTC’s allegations that it deceived its customers to generate subscriptions.

It is expected to be in court next year to defend itself against another FTC suit over what the regulator said was an illegal monopoly over pricing power and its relationship with third party sellers.

Amazon shares fell about 2.5 per cent on Monday. REUTERS