FTC to File Lawsuit Alleging Amazon Deceived Advertisers -- Update

By Dave Michaels

WASHINGTON-The Federal Trade Commission plans to file a lawsuit against Amazon.com on Monday alleging that the e-commerce giant manipulated prices businesses paid to advertise on its retail platform, reaping tens of billions of dollars for itself over seven years, according to agency officials.

The lawsuit, joined by a bipartisan group of more than 20 state attorneys general, will allege that Amazon deceived advertisers by secretly raising the minimum price advertisers had to pay to place ads promoting their products, FTC officials said.

The case, to be filed in a Seattle federal court, will become the consumer-protection agency's third major case against Amazon, which agreed to pay $2.5 billion last year to settle an earlier suit alleging it tricked people into signing up for its Prime service and made it hard to cancel the subscription. Another lawsuit alleging that Amazon engaged in illegal monopolization is headed for trial next year.

Amazon operates the third-largest digital-ad platform in the world behind Alphabet's Google and Meta Platforms. It earned $68 billion from ads in 2025, according to securities filings.

Advertisers allegedly suffered billions of dollars in harm by paying higher prices for ads. The states, which have the authority to seek civil penalties, could attempt to claw some of that money back. States expected to join the lawsuit include New York, California and Florida.

Merchants compete to offer different types of ads that elevate the prominence of their brand every time a shopper searches for a product. The FTC alleges that Amazon began changing its auction strategy in 2018, seeking to raise prices on advertisers in a way they wouldn't notice, according to officials.

The company had historically run a special type of auction, popular in Silicon Valley, designed to attract more bids and protect winners from dramatically overpaying. That formula tended to reduce the price a merchant paid to advertise.

To raise the price, Amazon began entering its own bid, known as a "soft reserve," which was higher than the price of the runner-up bidder, the FTC will allege. Under the rules of the auction, that raised the price paid for an ad. Amazon knew the merchants' competing bids and didn't disclose its new practice, officials said.

Amazon's ad executives tracked the "surcharge" they earned from the strategy and sought to limit how much others knew about it, FTC officials said. The executives initially deployed the strategy only on popular shopping days when companies would think higher ad rates resulted from intense competition for shoppers' attention, the officials said.

Amazon's goal was to capture for itself more of the value of a retail sale that stemmed from successful ads, according to the officials.

Amazon said Monday that it properly described to advertisers how its auctions work. It said it made improvements to its ad technology over time that delivered more relevant ads to consumers and therefore improved the value of advertising to businesses that sell on its platform.

The company said its approach sets a "real-time minimum value" that reflects what each ad is actually worth. Advertisers never pay more than they bid, Amazon said. The concept is "common across the industry," it said.

Amazon's ad practices had no impact on consumers, it added.

In recent years, Amazon has intervened in auctions to raise the minimum price 70% to 80% of the time, FTC officials said.

The FTC's claims include that Amazon's strategy raised the pay-per-click ad cost by 50% on major shopping days.

The lawsuit is set to add to the government's attempts to improve competition in digital advertising. The Justice Department previously brought antitrust claims against Google, alleging its ad practices were illegal.

A federal judge in 2025 found Google to be a monopolist in the advertising markets that website publishers use to support their businesses. The department is seeking a court order that forces Google to sell off its ad exchange and the platform that publishers use to manage ads. A federal judge in Alexandria, Va., is weighing whether to grant that remedy or order a less dramatic change.

Write to Dave Michaels at dave.michaels@wsj.com

(END) Dow Jones Newswires

August 31, 2026 14:58 ET (18:58 GMT)