Amazon faces a federal lawsuit filed Monday by the Federal Trade Commission and 22 states, which claim the online retailer defrauded advertising customers by misleading them about the prices they paid in online ad auctions.
The complaint, lodged in the U.S. District Court for the Western District of Washington, alleges that Amazon overcharged roughly 1.2 million advertising customers. Regulators say the company presented itself as offering competitive prices across several ad products while quietly inflating auction prices behind the scenes.
Central to the case is the claim that Amazon artificially raised the floor prices in its ad auctions, particularly during peak shopping periods when merchant demand runs highest. The added surcharges, regulators allege, amounted to billions of dollars in hidden fees layered onto merchants’ advertising budgets.
“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” said FTC Chairman Andrew Ferguson, adding that millions of advertising customers were misled into paying higher prices than they expected.
Amazon rejected the allegations. In a blog post, the company said the FTC “leans on a handful of simplified communications to allege a companywide effort to deceive,” describing that characterization as “patently false.”
For merchants, the stakes are concrete. Advertising has become a near-mandatory cost for sellers competing for visibility on Amazon’s marketplace, and higher auction floors mean thinner margins on every product a shopper sees promoted at the top of a search page. Many small sellers already contend with mounting cost pressures from tariffs and rising prices, and ad spending is one of the few levers within their control.
Advertising has grown into one of Amazon’s most profitable business lines. The segment, alongside its cloud arm, has driven recent earnings, with the company reporting strong momentum from its ad and AWS divisions in its most recent quarterly results.
The suit adds to a widening set of legal challenges confronting the company, which has drawn scrutiny from state and federal regulators over its marketplace practices and treatment of contractors. Amazon shares slipped following news of the filing.
The case now moves toward litigation in Washington, where the FTC and the participating states will seek to prove the alleged auction manipulation. Amazon has signaled it intends to contest the claims in full, setting up a prolonged court fight over how the company prices access to its advertising platform.