Amazon sued by FTC and 22 states over alleged $20 billion advertising fraud

The Federal Trade Commission (FTC) and 22 U.S. states have filed a lawsuit against Amazon, alleging the company rigged digital advertising auctions to overcharge advertisers by more than $20 billion since 2019.

The complaint, filed in the U.S. District Court for the Western District of Washington, claims Amazon utilized “soft reserve prices”—artificial bids inserted into the auction system without disclosure. This practice allegedly caused advertisers to pay first-price rates while believing they were participating in second-price auctions. Regulators estimate that over 1.2 million advertisers, including 500,000 small and medium-sized businesses, were affected.

Internal documents cited in the suit suggest Amazon employees were aware that these undisclosed reserve prices increased short-term revenue but could damage long-term trust. By 2024, approximately 80% of Sponsored Products auctions resulted in advertisers paying their full winning bid, a significant increase from the 30% to 40% range seen in 2021.

Amazon has denied the allegations, stating the lawsuit misinterprets advertiser behavior. The company maintains its advertising systems saved advertisers more than $8 billion between 2021 and 2025 through improved relevance and argues that the legal action provides no evidence of increased costs for consumers.