In the summer of 2019, according to US federal regulators, Amazon's advertising engineers began quietly testing how far they could push sellers before those sellers pushed back. An internal manager, cited in court documents, reportedly described the strategy as "hoping that advertisers don't notice and decrease bids or ad spend." On Monday, that internal calculus became the centrepiece of a sweeping lawsuit filed by the Federal Trade Commission and 22 US states, which allege that Amazon ran what they call an "ad-rigging scheme" that generated more than $20 billion in hidden surcharges over six years. The case turns on the mechanics of Amazon's advertising auction system, which is designed as a so-called second-price auction — a format in which the winning bidder pays only marginally more than the second-highest offer.

Regulators allege that Amazon secretly inserted artificial "shill" bids to inflate that second-price threshold, forcing the true winner to pay significantly more than a fair market would have demanded. The FTC estimates that approximately 1.2 million advertising customers were overcharged in this way, among them more than 500,000 small and medium-sized businesses. Those additional costs, the agency argues, were not absorbed by sellers but passed directly to consumers in the form of higher prices on groceries and everyday goods.

Amazon, whose advertising division has grown into the world's third-largest online ad marketplace after Google and Meta, generating over $68 billion in annual ad revenue, dismissed the action as a "misguided lawsuit." The company argued that regulators had cherry-picked "a handful of simplified communications" from roughly 1.5 million pages of reviewed documents to construct an implausible portrait of deliberate deception.