Federal and state regulators portray Amazon’s ad marketplace as a concealed overcharge that ultimately reached shoppers, while Amazon says the lawsuit mistakes a competitive, improving product for wrongdoing.

The dispute traces back to 2019, when the FTC and 22 states say Amazon began altering the outcome of advertising auctions. Advertisers were told prices reflected competitive bidding and would sit only slightly above the second-highest bid, according to the federal lawsuit filed Monday in Washington state. Instead, regulators allege, Amazon spent the past seven years replacing “the actual auction results with higher prices set by Amazon to increase its profits.”¹

The FTC says Amazon first tested the higher charges and found advertisers could not spot them, then concealed the change and denied responsibility when customers queried unusual price jumps. The coalition — which includes California — estimates the alleged scheme overcharged Amazon’s 1.2 million advertisers by more than $20 billion since 2019. California Attorney General Rob Bonta called it a system in which Amazon “rigged billions of ad auctions,” hurting small and medium-sized businesses that depend on the platform.¹

Regulators argue the stakes extend beyond advertisers. Sellers use Amazon ads to move groceries, medicines, clothing and school supplies, and the complaint contends that a meaningful share of added costs was passed on to consumers. The suit seeks damages and an order barring deceptive practices; Amazon generated roughly $68 billion in advertising revenue last year.¹

Amazon flatly rejects that framing. It says there is “no consumer harm” and that, from 2019 through 2024, sponsored-product advertisers’ average inflation-adjusted cost per click remained flat — or lower — even as campaign performance improved.¹ The company also says customers saved an average of more than $230 last year on essential and other goods.

The FTC began investigating Amazon in 2022 under President Joe Biden and continued under President Donald Trump, setting up a test of whether the agency can prove a hidden auction mechanism — rather than ordinary price-setting — drove the alleged overcharges.¹