The premise of an auction is simple: the highest bidder wins, and everyone else loses honestly. Amazon's advertising system, regulators now allege, quietly abandoned that premise. On Monday, the US Federal Trade Commission and a bipartisan coalition of 22 states filed a lawsuit in Washington — Amazon's home state — accusing the company of secretly manipulating the digital auctions it uses to price advertisements on its platform, overcharging more than one million advertising customers to the tune of roughly $20 billion since 2019. The mechanism at the centre of the complaint is a category known as a "second-price auction.

" Under its standard rules, the winning advertiser pays just one cent more than the second-highest bid — a design intended to encourage honest bidding. The FTC alleges, however, that Amazon charged its Sponsored Products advertisers their own full winning bid approximately 80% of the time, rather than the lower amount the auction format promised. The company is accused of deliberately overriding actual results and substituting higher prices when its auction revenues fell short of internal targets. Those extra costs, the complaint argues, were ultimately passed on to ordinary shoppers, meaning consumers rather than corporations absorbed much of the burden.

Amazon has pushed back forcefully. The company called the lawsuit "misguided" and argued that the FTC "fundamentally misunderstands how advertisers operate," pointing out that average winning bids on Sponsored Products search ads fell 50% between 2019 and 2025. Amazon's shares still fell 2.5% on the day of the announcement, a signal that investors are not yet certain who has the stronger argument.