Amazon.com Inc (NASDAQ:AMZN) shares closed 2.5% lower after the US Federal Trade Commission filed a lawsuit alleging the e-commerce giant manipulated advertising prices on its platform and extracted tens of billions of dollars from businesses over seven years.
The case, joined by a bipartisan group of more than 20 state attorneys general, alleges Amazon secretly increased the minimum price advertisers were required to pay to promote products on its marketplace.
According to the complaint, advertisers suffered more than US$20 billion in harm as a result of higher ad prices. States including New York, California and Florida have joined the action and could seek civil penalties or attempt to recover some of the alleged losses.
Auction practices under scrutiny
The FTC alleges Amazon began changing its advertising auction strategy in 2018 in ways designed to lift prices without advertisers noticing.
Merchants compete for advertising positions whenever shoppers search for products on Amazon. The complaint claims Amazon began inserting its own bid into some auctions through a mechanism executives internally referred to as a “soft reserve”.
That reserve was allegedly set above the bid that would otherwise have determined the advertising price, increasing the amount ultimately paid by merchants.
The FTC claims Amazon had visibility over competing bids but did not disclose the practice to advertisers.
Amazon rejected the allegations, saying it accurately explained how its auctions operated and that improvements to its advertising technology had increased the relevance and value of ads for businesses.
The company said its system establishes a “real-time minimum value” based on what an advertisement is worth, adding that advertisers never pay more than their submitted bids and that similar approaches are common across the digital advertising industry.
Growing regulatory pressure
Amazon operates the world’s third-largest digital advertising platform behind Alphabet Inc (NASDAQ:GOOG)’s Google and Meta Platforms Inc (NASDAQ:META, XETRA:FB2A, SIX:FB), generating US$68 billion in advertising revenue during 2025.
The latest action is the FTC’s third major case against Amazon.
The company last year agreed to pay US$2.5 billion to settle a separate lawsuit alleging customers were misled into signing up for its Prime subscription service and faced obstacles when attempting to cancel.
Another FTC lawsuit accusing Amazon of illegally maintaining monopoly power is scheduled to go to trial next year, adding to the regulatory pressure facing one of the world’s largest technology companies.