Amazon Accused of Rigging $20bn in Ad Prices

Published: 01 September 2026. The English Chronicle Desk. The English Chronicle Online

Amazon secretly overcharged more than a million advertising customers by manipulating the online auctions used to determine advertising prices, according to a lawsuit filed in the United States by the Federal Trade Commission and a bipartisan coalition of 22 states.

The complaint alleges that the e-commerce giant’s advertising business generated as much as $20bn (£14.8bn) in additional revenue through the alleged practices since 2019.

Amazon strongly disputes the allegations, describing the lawsuit as misguided and arguing that the regulator has misunderstood how its advertising marketplace works.

The legal action represents another major confrontation between Amazon and US regulators and could expose the company to significant financial and operational consequences if the allegations are ultimately upheld.

The lawsuit was filed on Monday in Washington state, where Amazon is headquartered. The complaint alleges that Amazon altered the results of advertising auctions in order to charge advertisers more than they should have paid under the auction system that customers believed they were participating in.

“Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits,” the complaint alleges.

Amazon rejected that characterization.

In a statement to the BBC, the company said it “strongly disagrees” with the premise that it misled advertisers.

The dispute centres on one of Amazon’s most important and rapidly expanding businesses: digital advertising.

How Amazon’s advertising auctions work

Brands and independent sellers use Amazon’s advertising platform to promote products when consumers search for particular keywords.

Sponsored Products and Sponsored Brands advertisements can appear prominently in search results and other locations across Amazon’s online marketplace.

Advertisers compete for these placements by submitting bids.

The auction mechanism is therefore crucial because it determines both which advertisements are displayed and how much advertisers ultimately pay.

The FTC and the participating states argue that Amazon presented these auctions to advertisers as operating under a form of “second price” system.

Under such an arrangement, an advertiser winning an auction would generally expect to pay an amount linked to the next-highest competing bid, rather than simply paying its own maximum bid.

The lawsuit alleges that Amazon did not consistently follow that model.

According to the complaint, Amazon charged Sponsored Products advertisers their own winning bid nearly 80% of the time.

The regulators argue that this meant advertisers paid substantially more than they expected based on their understanding of the auction system.

The complaint claims Amazon made changes to the auction mechanism because executives believed the advertising business was not generating enough revenue.

The alleged practices, according to the regulators, allowed Amazon to increase advertising income while maintaining the appearance of a competitive auction.

Amazon rejects the allegations

Amazon has strongly challenged the government’s interpretation of its advertising system.

The company said the FTC “fundamentally misunderstands how advertisers operate”.

Amazon argued that advertisers do not necessarily determine their bids based on a simplified understanding of auction mechanics.

Instead, the company said advertisers adjust their bids according to the real-world performance of their campaigns, including the value generated by advertisements.

Amazon also disputed the government’s interpretation of its auction data.

The company said average winning bids for Sponsored Products search advertising fell by 50% between 2019 and 2025.

It also said that roughly 92% of placed advertisements were not awarded to the highest bid.

Those figures, Amazon argues, undermine the regulators’ description of the advertising system as a straightforward auction in which the highest bidder consistently wins and pays a predictable amount.

The company has therefore characterized the lawsuit as an attempt to portray a complex advertising marketplace in a misleading way.

The court will ultimately have to assess the competing interpretations of Amazon’s auction mechanisms and determine whether the company’s practices violated US law.

Regulators say consumers are also affected

Although the lawsuit focuses on Amazon’s relationship with advertisers, the FTC and the states argue that the alleged conduct has consequences for consumers as well.

The regulators contend that higher advertising costs can eventually be incorporated into the prices businesses charge for their products.

Because millions of sellers and brands use Amazon’s advertising system, the government argues that additional advertising expenses could ultimately contribute to higher prices for shoppers.

“Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result,” the complaint states.

Amazon rejected that argument.

“The FTC wants the public to believe this case is about higher prices for consumers. It is not,” the company said.

The disagreement highlights a broader issue in digital commerce: the extent to which fees and costs charged to businesses are eventually passed on to consumers.

For brands competing for visibility in crowded online marketplaces, advertising can represent a significant part of the cost of reaching customers.

Amazon’s advertising empire

Digital advertising has become an increasingly important source of revenue for Amazon.

The company’s enormous volume of consumer searches gives advertisers access to highly valuable information about what shoppers are actively looking to buy.

That makes Amazon’s advertising business different from traditional advertising platforms.

An advertiser promoting a product after a consumer searches for a specific item may be reaching someone much closer to making a purchase than a person who simply encounters a conventional advertisement.

This has helped Amazon become a major force in the global digital advertising market.

The FTC’s lawsuit could therefore have implications extending beyond a dispute over individual auction prices.

If regulators successfully establish that Amazon manipulated its auction system, the case could lead to greater scrutiny of how large technology companies operate digital advertising marketplaces.

Another regulatory battle for Amazon

The lawsuit is not Amazon’s first major confrontation with the FTC.

Last year, the company agreed to a $2.5bn settlement with the regulator over allegations concerning its Prime subscription service.

The FTC had accused Amazon of enrolling millions of consumers in Prime without their consent and deliberately making the cancellation process difficult.

Amazon agreed to the settlement, which included civil penalties and refunds for consumers.

The company did not admit wrongdoing as part of the settlement.

The latest advertising lawsuit is different because it directly challenges the operation of one of Amazon’s core commercial systems.

The case could therefore become an important test of how regulators approach digital marketplaces whose business models depend on complex algorithms and automated pricing systems.

A wider debate over algorithmic marketplaces

Digital advertising auctions are increasingly controlled by automated systems.

Instead of negotiating directly with individual advertisers, technology platforms use algorithms to process enormous numbers of bids and determine placements and prices in fractions of a second.

The complexity of those systems can make it difficult for advertisers, regulators and consumers to understand precisely how prices are calculated.

That lack of transparency has become a growing policy concern.

Regulators around the world are examining whether dominant technology platforms have enough control over digital markets to influence prices, visibility and competition in ways that may not be obvious to businesses using their services.

The Amazon lawsuit adds another dimension to that debate.

The central question is not simply whether Amazon’s advertising prices were high, but whether advertisers were given an accurate understanding of how those prices were determined.

The significance for sellers and brands

For companies selling products on Amazon, advertising is often an important tool for gaining visibility.

Competition can be intense, particularly for popular product categories where many sellers are targeting the same search terms.

A difference of even a small amount in advertising costs can have an impact on a seller’s profit margins when multiplied across thousands of transactions.

If the government’s allegations are proven, affected advertisers could argue that they paid more than they should have under the system they believed they were using.

That could increase pressure on Amazon to provide greater transparency around advertising auctions.

However, Amazon’s response suggests that the company believes the government’s interpretation oversimplifies how its advertising marketplace operates.

The eventual outcome could therefore depend heavily on technical evidence concerning bidding, auction design and pricing algorithms.

Market reaction

Investors reacted quickly to the news of the lawsuit.

Amazon shares fell 2.5% on Monday following the announcement.

The decline reflects concerns about the potential financial consequences of the case as well as broader regulatory pressure facing the company.

Large technology companies have increasingly faced investigations and lawsuits from regulators seeking to challenge their market power and business practices.

For investors, the financial impact of such cases can extend beyond potential fines.

Regulatory action can also force companies to change business models, pricing systems or relationships with customers and suppliers.

Amazon’s advertising operation is particularly significant because it has become a major component of the company’s broader business ecosystem.

What happens next

The lawsuit will now move through the US legal system, where Amazon will have an opportunity to challenge the government’s allegations.

The FTC and participating states will have to demonstrate that Amazon’s conduct violated applicable laws and caused the harms alleged in the complaint.

Amazon, meanwhile, is expected to defend the design and operation of its advertising marketplace and challenge the regulators’ interpretation of its auction data.

The case could take considerable time to resolve.

Its outcome may nevertheless have implications for the wider digital advertising industry.

A ruling against Amazon could encourage regulators and advertisers to demand greater transparency from other platforms that use automated auctions to sell advertising space.

It could also influence how technology companies design digital marketplaces in the future.

A test for digital advertising

The dispute comes at a time when advertising has become increasingly integrated into online shopping.

Consumers may see sponsored products as part of their normal search experience, while sellers depend on advertising systems to compete for attention.

That makes the integrity of the underlying auction process increasingly important.

The FTC and the states are effectively arguing that Amazon used its position as a dominant marketplace operator to extract additional money from advertisers through a system they say did not operate as represented.

Amazon maintains that the government’s case is based on a fundamental misunderstanding of how its advertising products function.

The competing claims now face scrutiny in court.

Whatever the eventual outcome, the case is likely to intensify debate over transparency, algorithmic pricing and the power of technology companies to control digital marketplaces.

For Amazon, it represents another significant regulatory challenge at a time when its business is expanding across commerce, cloud computing, entertainment and advertising.

For advertisers and consumers, the case could help determine how much transparency they can expect from the digital platforms that increasingly influence what products people see, buy and ultimately pay for.

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