WASHINGTON — The lawsuit alleges that Amazon has secretly and systematically overcharged its approximately 1.2 million advertising customers since 2019. These customers include over 500,000 small and medium-sized businesses. According to the filing, Amazon overrides actual auction results with higher prices to increase profits despite representing that competitive auctions set ad prices.

The FTC obtained internal documents and messages revealing that Amazon inflated auction prices for Sponsored Products, Sponsored Brands, and Sponsored Display advertisements. The complaint alleges Amazon has charged its Sponsored Products advertisers their own winning bid close to 80% of the time.

Attorneys general from Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington joined the FTC lawsuit. The FTC investigation into Amazon's advertising practices began in 2024.

This legal challenge follows a previous resolution between the parties. Amazon settled a case with the FTC last year for $2.5bn, including civil penalties and consumer refunds, regarding allegations it enrolled millions of consumers in its Prime subscription offering without their consent.

Why It Matters

The lawsuit targets a core revenue stream for Amazon, which generated more than $68bn in ad revenue last year. The allegations cover a five-year period from 2019 to 2024 and involve approximately 1.2 million advertising customers. If the court finds merit in the claim that the scheme illegally extracted over $20 billion, the financial implications for the company could be substantial.

The participation of 22 state attorneys general alongside the Federal Trade Commission indicates a broad regulatory consensus on the severity of the allegations. This multi-state coalition suggests that the impact of the alleged pricing manipulation extends beyond federal jurisdiction to affect local businesses across the United States. The case proceeds in the US District Court for the Western District of Washington.

What's New

Additional reporting confirms that the complaint was filed in the U.S. District Court for the Western District of Washington. Amazon's approximately 1.2 million advertising customers, which include over 500,000 small and medium-sized businesses, were directly affected by the alleged overcharging. Amazon generated more than $68bn in ad revenue last year.

The lawsuit says Amazon significantly inflated prices on peak shopping days. Amazon stated that average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads.

Amazon stated it strongly disagrees with the claims and says the government does not understand its advertisement process. "The FTC’s claim fundamentally misunderstands how advertisers operate. Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics. Even accepting the FTC’s flawed premise that advertisers do not adjust bids, we estimate they saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone."

How Sources Differ

Sources differ on the specific designation of the district court. The US District Court for the Western District of Washington complaint states that the Federal Trade Commission and 22 states filed a lawsuit against Amazon in the US District Court for the Western District of Washington.