FTC and 22 States Sue Amazon, Alleging It Secretly Rigged $20 Billion Ad Auction

Today’s Focus

The Federal Trade Commission (FTC) and 22 state attorneys general filed suit against Amazon on Monday, accusing the company of secretly rigging its advertising auction system to overcharge sellers by billions of dollars, according to reporting from The New York Times and BBC News.

The complaint, filed in federal court in Seattle, alleges that Amazon changed the underlying mechanics of its sponsored-ads auction beginning in 2018 without telling advertisers. The FTC says the changes generated roughly $20 billion in additional revenue that the agency argues was extracted through deception, BBC reported.

At the center of the case is a switch from a “second-price” auction, in which the winning bidder pays just above the second-highest bid, to what the FTC describes as a modified system that pushed prices closer to the winner’s actual bid. The Verge reported that the agency contends Amazon concealed the change from small sellers who rely on sponsored placements to appear in search results.

FTC Chair Andrew Ferguson said in a statement the agency was targeting what it called “secret and systematic” price manipulation, according to The Verge. The lawsuit seeks monetary penalties and structural changes to how Amazon runs its ad marketplace.

Amazon rejected the allegations. In a statement cited by the Wall Street Journal, the company said the FTC’s theory misrepresents standard ad-auction practice and that advertisers can see their bids, budgets, and results in real time. Amazon’s advertising business generated more than $56 billion in revenue in 2024, making it the third-largest digital ad platform behind Google and Meta, the Times reported.

The case is the second major federal action against Amazon in three years, following the 2023 antitrust suit still pending over the company’s marketplace conduct.

The Debate

Supporters argue

FTC Chair Andrew Ferguson framed the case as a straightforward consumer-protection matter, saying advertisers “were told one thing and charged another,” according to The Verge. State attorneys general who joined the complaint, including from California and New York, argue small sellers had no way to detect the pricing shift because Amazon controls all the auction data.

Consumer advocates say the alleged conduct fits a broader pattern. The American Economic Liberties Project, which has pushed for aggressive Amazon enforcement, said the auction changes functioned as a hidden tax on the roughly two million third-party sellers who depend on the platform to reach customers, per coverage in the New York Times.

Supporters also point to the money at stake. BBC reported that the FTC estimates roughly $20 billion in overcharges, a figure the agency says flowed disproportionately from small businesses that could not negotiate custom terms.

Editorial support has come from outlets that have long argued digital ad markets lack transparency. The WSJ’s Morning Risk Report noted that compliance officers view the case as a signal that regulators are now scrutinizing auction design itself, not just outcomes.

Critics argue

Amazon called the lawsuit meritless and said the FTC misunderstands how modern ad auctions function. In a statement quoted by the Wall Street Journal, the company said advertisers set their own maximum bids and daily budgets and can pull spending at any time.

Business groups sided with Amazon on the auction-design question. The U.S. Chamber of Commerce has previously argued that the FTC under Chair Ferguson, and before him Lina Khan, has stretched consumer-protection statutes to cover ordinary pricing decisions, a critique repeated in coverage by Yahoo Finance’s analyst roundup.

Some conservative commentators questioned the timing and scope. Writers at Reason have argued that second-price auctions are not legally required and that platforms routinely tune auction parameters to balance revenue and advertiser retention.

Amazon also argued the FTC ignores competition. The company told the Times that advertisers can and do shift budgets to Google, Meta, TikTok, and retail-media rivals like Walmart Connect, which it says disciplines any attempt to overcharge.

What the experts say

Ad-tech scholars have documented for years that auction mechanics on major platforms are opaque to buyers. A 2020 study by Wharton marketing professor Pinar Yildirim found that sellers on Amazon frequently could not reconcile their bids with final charges, suggesting information asymmetry independent of any specific rule change.

Research from the nonpartisan Congressional Research Service (CRS) notes that “second-price” auctions have been the theoretical gold standard since economist William Vickrey’s Nobel-winning work, because they encourage honest bidding. Google publicly moved its own ad auction away from a pure second-price model in 2019, a shift the company disclosed, according to reporting archived by the Times.

The Brookings Institution’s Center for Technology Innovation has argued that retail-media platforms like Amazon now function as gatekeepers for physical goods commerce, with roughly 40% of U.S. online shopping searches starting on Amazon, per a 2023 Jungle Scout survey Brookings cited. That market position, scholars note, raises the stakes of any auction-design change even absent a finding of illegal conduct.

By the Numbers

$20 billion: approximate overcharge the FTC alleges Amazon collected through auction changes, per BBC News.
22: number of state attorneys general joining the FTC complaint, according to The New York Times.
2018: year the FTC says Amazon began altering its sponsored-ads auction mechanics, per The Verge.
$56.2 billion: Amazon’s global advertising revenue in 2024, reported by The New York Times.
2 million: approximate number of third-party sellers active on Amazon’s U.S. marketplace, per company disclosures cited by the Times.
40%: share of U.S. online product searches that begin on Amazon, according to a 2023 Jungle Scout survey cited by Brookings.
2023: year the FTC filed its first, separate antitrust lawsuit against Amazon, still pending in the same Seattle court, per WSJ.