The Federal Trade Commission and a bipartisan coalition of 22 U.S. states filed an antitrust lawsuit against Amazon on Monday, August 31, 2026, in the U.S. District Court for the Western District of Washington. According to the court filing, the regulators allege that Amazon engaged in deceptive practices by secretly inflating prices in its online search advertising auctions over a period exceeding seven years.
The legal action involves the attorneys general of Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington. Per the complaint, the alleged scheme covertly increased advertising costs for more than 1 million brands and sellers, including over 500,000 small and medium-sized businesses.
Regulators claim that Amazon misrepresented the mechanics of its second-price auctions, where auction winners typically pay one cent more than the next highest bidder. Instead, according to the FTC, Amazon charged advertisers their exact winning bid approximately 80 percent of the time by 2024, representing an increase from 30 to 40 percent in 2021 and 70 percent in 2022. The complaint states this shift was accomplished by introducing an undisclosed soft reserve price into the auction system, which converted the mechanism into a first-price auction and extracted tens of billions of dollars from participants.
"When one of the world's largest online retailers engages in unfair and deceptive conduct, the impact can be staggering," FTC Chairman Andrew N. Ferguson stated in a press release. "Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers."
California Attorney General Rob Bonta echoed those assertions during a joint briefing. "For years, Amazon has misrepresented how it calculates the cost of advertising on its platform," Rob Bonta stated. "Over the years, Amazon has rigged billions of ad auctions, inflating Amazon's profits at the expense of Americans who rely on Amazon's advertising to generate business."
The exact total monetary damages sought by the federal and state regulators have not been specified as a final figure in the public complaint, beyond the estimated tens of billions of dollars in cumulative overcharges.
Amazon Rejects Allegations of Auction Manipulation
Amazon issued a formal response via a corporate blog post, rejecting the lawsuit as misguided and flawed. The company argued that the regulatory complaint fundamentally misinterprets how digital advertisers operate in the marketplace.
"The FTC's claim fundamentally misunderstands how advertisers operate," Amazon stated in its public defense. "Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics."
In its defense filings, Amazon disputed the assertions of financial harm to sellers or consumers. The company asserted that advertisers saved more than $8 billion between 2021 and 2025 because Amazon prioritizes advertisement relevance over bid price alone. Amazon also reported that average winning bids for Sponsored Products search ads fell by 50 percent from 2019 to 2025, and that approximately 92 percent of placed advertisements are not awarded to the highest bidder.
Historical Context and Market Impact
This litigation adds to a growing docket of regulatory challenges facing the retail conglomerate. Amazon previously agreed to a $2.5 billion settlement with the FTC in 2025 to resolve separate allegations concerning deceptive customer enrollment practices in Prime subscriptions. In addition, California Attorney General Rob Bonta filed a separate antitrust lawsuit against Amazon in 2022, accusing the company of leveraging anticompetitive tactics to dominate online retail, with that trial scheduled to begin in January 2027.
The immediate market reaction saw Amazon stock prices decline by 2.5 percent following the announcement of the lawsuit. For the more than 1 million brands and independent sellers operating on the platform, the legal proceedings raise questions regarding advertising overhead and operational profitability.
