FTC v. Amazon (Ad Auction)

On August 31, 2026, the Federal Trade Commission (FTC) sued Amazon.com, Inc. in the U.S. District Court for the Western District of Washington. The attorneys general of 22 states, led by Washington, joined the suit. The complaint alleges that, starting in 2019, Amazon secretly overrode the results of the “second-price” auctions that it told advertisers set the cost of its sponsored ads. These included Sponsored Products, Sponsored Brands, and Sponsored Display placements on Amazon.com and its mobile app.

The government contends Amazon told advertisers they would pay only one cent more than the next-highest bidder. Instead, it says, Amazon imposed undisclosed surcharges that inflated prices for roughly 1.2 million advertising customers, including more than 500,000 small and medium-sized businesses. The complaint frames the conduct as both a deceptive and an unfair practice, citing internal Amazon documents and employee communications. Regulators say those materials show the company knew advertisers believed they were bidding in a genuine second-price auction. The FTC and the states allege the scheme let Amazon extract more than $20B over roughly seven years, much of it passed on to consumers.

The plaintiffs seek an injunction to stop the practice, monetary relief, and civil penalties under state consumer-protection statutes. Amazon has denied the allegations, calling the lawsuit “misguided” and “flawed” and arguing that the FTC “cherry-picked” outdated internal documents. The company says average winning bids for sponsored-product ads fell by half between 2019 and 2025. It also says advertisers adjust bids based on real-world ad performance rather than a description of auction mechanics.

Texas Attorney General Ken Paxton filed a separate, parallel lawsuit the same day. It makes similar allegations under Texas consumer-protection law, and Texas did not join the federal case. The case is also distinct from the FTC’s earlier monopolization suit against Amazon over its marketplace conduct, which remains pending before a different judge in the same district. As of September 2026, Amazon’s defense team includes lawyers from Dunn Isaacson Rhee LLP and Wachtell, Lipton, Rosen & Katz. The case is at the pleadings stage, with no ruling yet on the merits or on any motion to dismiss.