FTC and 22 states sue Amazon, saying a hidden auction rule overcharged advertisers $20 billion

The Federal Trade Commission and 22 state attorneys general from both parties sued Amazon on Monday, Aug. 31. They say the company rigged the auctions that decide which product ads appear in its search results. Amazon told advertisers it ran a "second-price" auction: the winner pays one cent more than the second-place bid. Regulators say that in 2019 Amazon quietly added a hidden floor price it set itself. The winner then paid whichever number was higher — the real runner-up bid, or Amazon's own invented one, up to the winner's maximum. The FTC says the effect shows up in the totals. Winners of Sponsored Products ads (the ads sellers buy to appear on Amazon's own search page) paid nearly their full bid in almost 80% of the auctions they won. That comes to at least $20 billion in improper charges to more than 1 million advertisers, brands and sellers. Some of that cost reached shoppers in higher product prices, the complaint says; it puts no number on how much. A former Amazon employee quoted in the complaint said the system enabled prices "beyond what [can] be achieved through advertiser competition." Amazon denies misleading anyone. It says the FTC misunderstands how its ad system works. It points to figures it released: average winning bids on Sponsored Products search ads fell 50% between 2019 and 2025, and cost per click, adjusted for inflation, was flat from 2019 to 2024. North Carolina Attorney General Jeff Jackson wrote that "we believe Amazon found a way to charge a few extra pennies to an enormous number of transactions."

What Amazon's rebuttal numbers do and do not answer:

• Amazon says that in roughly 92% of ad placements, a lower bidder won. That speaks to who wins an auction, not what the winner is charged.
• Amazon says that choosing ads by relevance, rather than by bid alone, saved advertisers an estimated $8 billion from 2021 through 2025. That is Amazon's own estimate of a discount, not a test of the alleged surcharge.
• Amazon has not published the underlying auctions, the bid distributions or the method behind any of those figures.
• The FTC's claim is narrower: the same winner would have paid one cent above the genuine runner-up. Average bids can fall while individual winners still pay above that line.