A new lawsuit from the US Federal Trade Commission and 22 states alleges that Amazon cheated customers out of millions by manipulating its ad prices through its online auctions.

Amazon’s advertisement placement model often functions like an auction, with advertisers bidding for better placement on search results and the marketplace.

The lawsuit claims that Amazon has been inflating the auction prices shown to advertisers, amassing $20 billion or more from the unknowing customers.

Auctions typically take place in less than a second as a search term is submitted, with a firm’s computer system automatically bidding for their product to appear at the top. The FTC says that Amazon would artificially raise prices by sometimes entering its own bid without other advertisers knowing it.

The higher cost of advertising would then be passed onto the consumer, the FTC alleges. It said that in 80% of sponsored products auctions, there was some form of intervention by Amazon.

The case routes back to changes in Amazon’s advertising model from 2019.

The company has seen it climb to be the third biggest online advertiser after Google and Meta, with its ad sales rising 26% in 2026’s second quarter to $19.8 billion.

The firm has denied all allegations brought up by the lawsuit, saying that the average price per click for ads has actually remained flat from 2019 to 2024, while sales increased.

It said that its approach to pricing “contradicts any suggestion of consumer harm.”

It also said that the FTC lawsuit was relying on claims that “fundamentally misunderstands how advertisers operate.”

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“Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics,” the company said in a statement.

“Average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads, and roughly 92% of placed ads are not given to the highest bid.”

Still, the announcement of the lawsuit, despite Amazon’s denial of wrongdoing, saw Amazon’s shares fall about 2.5% after it was announced.

Amazon had to pay the FTC $2.5bn last year over a case that said the tech giant deceived Prime customers to increase subscriptions