The U.S. Federal Trade Commission (FTC) and a bipartisan group of 22 states filed a federal lawsuit against Amazon on Monday, accusing the company of running a years-long scheme to secretly inflate advertising prices for more than a million businesses. The case was filed in the U.S. District Court for the Western District of Washington.

FTC & 22 STATES TO SUE $AMZN OVER ALLEGED SECRET AD PRICE HIKES

The FTC is expected to allege Amazon manipulated its ad auctions by inserting its own "soft reserve" bid above the runner-up bid, effectively raising the minimum price advertisers had to pay. The practice… pic.twitter.com/ffXicNdmxx — Wall St Engine (@wallstengine) August 31, 2026

What Amazon Is Accused Of

The complaint centers on three ad types: sponsored products, brand ads, and display ads — the ads that appear alongside search results when shoppers look for products on Amazon. For many sellers, these placements are effectively a cost of doing business: products that do not appear near the top of search results are far less likely to be seen by shoppers, which makes the allegations about auction mechanics a core concern for the millions of merchants who rely on the marketplace.

The FTC says Amazon changed its auction rules in 2019 and then quietly began pushing up the minimum prices needed to win ad placements. According to the complaint, Amazon sometimes entered its own bids into the auctions, driving up costs for other advertisers without their knowledge. The agency claims Amazon intervened in as many as 80% of sponsored product ad auctions.

The alleged scheme affected roughly 1.2 million advertisers, who the FTC says were overcharged by at least $20 billion since the 2019 rule changes. Because advertisers paid more, businesses raised their own prices to cover the extra cost, meaning consumers also ended up paying more, the FTC alleges. The agency is seeking "tens of billions" in total damages.

Amazon Pushes Back

Amazon denied the allegations in a blog post published Monday. The company said its advertising policies are designed to show shoppers the most relevant ads, not to inflate costs.

Amazon said the average cost per click stayed flat from 2019 to 2024, while the sales those clicks generated actually grew. The company also said it saved advertisers around $8 billion between 2021 and 2025, and that average winning bids on sponsored product search ads fell 50% from 2019 to 2025.

"Amazon's approach to pricing contradicts any suggestion of consumer harm," the company said.

Broader Legal and Business Context

Amazon is already facing a separate FTC lawsuit over alleged monopoly pricing power and its relationship with third-party sellers, which is expected to go to court next year. Last year, the company agreed to pay $2.5 billion to settle FTC claims that it deceived customers into Prime subscriptions.

Amazon is now the world's third-largest digital advertising company, behind Google and Meta. Its ad sales rose 26% in the second quarter of this year to $19.8 billion. Advertising has become one of Amazon's most profitable revenue streams, and the outcome of the case will be closely watched by advertisers, rival ad platforms, and regulators scrutinizing how large tech companies operate marketplace auctions.

The case is at an early stage: Amazon is expected to contest the allegations in court, and any resolution — through trial, settlement, or dismissal — will likely take considerable time. What to watch going forward includes Amazon's formal court response, whether other states or advertisers join or file related claims, and how the proceedings interact with the separate FTC monopoly case heading to trial next year.

Amazon shares dropped around 2.5% on Monday following news of the lawsuit.