US FTC Sues Amazon Over Alleged $20 Billion Ad Overcharging Scheme

The US Federal Trade Commission, joined by attorneys general from 22 states, has filed a lawsuit against Amazon accusing the e-commerce giant of quietly manipulating its advertising auctions in a way that overcharged advertisers by an estimated $20 billion. The complaint, lodged in a Seattle federal court, marks one of the most significant regulatory actions taken against Amazon's advertising business to date.

What the lawsuit alleges

According to the complaint, Amazon introduced a pricing mechanism in 2019 known internally as a "soft reserve price" that altered how sponsored-listing ad auctions were priced. Regulators allege the company did not adequately explain this change to advertisers, effectively allowing Amazon to extract higher fees without customers fully understanding how the new pricing worked.

The FTC says the practice affected roughly 1.2 million advertisers who use Amazon's platform to promote products, with more than 500,000 of them classified as small and medium-sized businesses. Many of these sellers rely heavily on Amazon's sponsored-ad placements to remain visible on the platform, giving the company significant leverage over how those advertising dollars are spent.

How the case came together

Investigators say the FTC built its case after reviewing more than a million internal Amazon documents obtained through subpoenas issued during a multi-year investigation. The scale of the document review suggests regulators spent considerable time examining internal communications and pricing models before deciding to proceed with litigation.

The involvement of 22 state attorneys general alongside the federal regulator signals a coordinated, multi-jurisdictional effort, a pattern increasingly common in major tech antitrust and consumer-protection cases in the United States.

Amazon's response

Amazon has pushed back firmly against the allegations, arguing that the 2019 changes to its ad auction system were designed to improve advertising performance and, over time, delivered better returns and lower effective costs for advertisers rather than higher ones. The company is expected to contest the FTC's economic modelling and its characterisation of what advertisers were told about the pricing changes.

Why it matters

Amazon's advertising division has grown into one of the most profitable parts of its business, rivalling large digital ad platforms in scale. A ruling against the company could force changes to how it prices and discloses ad auction mechanics, potentially affecting margins in a unit that has increasingly underpinned the company's overall profitability. It could also embolden further scrutiny of pricing transparency practices at other large online marketplaces that operate similar auction-based advertising systems.

The case adds to a growing list of legal and regulatory challenges facing large US technology companies over their advertising and marketplace practices, and its outcome is likely to be watched closely by both advertisers and rival platforms as it moves through the courts in the months ahead.

This article is an original editorial summary based on publicly reported information. It has been independently written for publication and does not reproduce content from any single source.