The Federal Trade Commission, along with nearly two dozen state attorneys general, filed a lawsuit against Amazon in federal court on Monday. This is the first major federal lawsuit targeting Amazon’s advertising unit specifically. The complaint says that Amazon misled more than two million advertisers by inflating prices during its ad auctions. These actions brought in over $20 billion for the company. According to documents cited in the suit, Amazon began changing its auction system to charge higher prices as early as 2018. This came six years after Amazon first launched its ad auction. The lawsuit seeks an injunction to stop the company from continuing these practices. It also asks for monetary compensation for harm caused to advertisers. The FTC and state officials did not specify the amount of damages being sought.
Amazon did not immediately return Axios’ request for comment, according to Yahoo Finance. The FTC’s chairman, Andrew N. Ferguson, said that Amazon’s actions could have a major impact on consumers and businesses, according to a report from twincities.com. He added that the company’s behavior was unfair and deceptive.
Amazon responded by calling the lawsuit misguided, CBS News reported. The company said that average winning bid prices for sponsored product ads dropped by half between 2019 and 2025. Amazon also argued that the FTC’s claims misunderstood how advertising works.
The lawsuit alleges that Amazon tested hidden charges to see how much it could increase costs without advertisers noticing. It claims the company deliberately hid these price increases from customers.
The FTC and state officials are asking a court to block Amazon from continuing this scheme. They also want the company to pay penalties, restitution, and other damages.
New York Attorney General Letitia James said that Amazon’s actions were illegal. She added that the lawsuit aims to protect advertising customers from unfair treatment.
This is not the first time federal regulators have taken legal action against Amazon. Previous cases focused on antitrust issues in its e-commerce business and Prime enrollment practices. However, this lawsuit is the first to specifically target Amazon’s advertising unit.
Other tech firms, most notably Google, have faced more public scrutiny over their ad practices. The Justice Department won an antitrust case against Google last year for illegally monopolizing parts of its digital ad tech.
Amazon’s advertising system uses a method known as second-price auctions, which is standard in the digital ad industry. The FTC and state attorneys general argue that Amazon’s use of this method was deceptive. They say the company misled advertisers about how much they were actually paying for ad placements.
The lawsuit is part of a larger effort to hold large tech firms accountable for their business practices. It comes amid growing concern over how major platforms handle advertising data and pricing.
IMAGE: Shutter_Speed / Pixabay
NEW FRONT TYRES. Photo: Andrew Basterfield / Wikimedia, taken 2011-08-21, CC BY-SA 2.0