Amazon sued by FTC for hidden ad fees
The FTC and 22 states sued Amazon on August 31, 2026, accusing it of secretly inflating ad prices and causing billions in harm. Amazon's stock fell 2.5%.
Shares of Amazon.com fell 2.5% on Monday, August 31, 2026, following news of a lawsuit from the Federal Trade Commission. The FTC and 22 states plan to file a lawsuit alleging Amazon manipulated prices paid by marketplace merchants, causing billions of dollars in harm.
The FTC claims Amazon secretly inflated the minimum prices required to win ad placements. Regulators allege the company intervened in auctions to raise prices 70% to 80% of the time. Amazon officials reportedly tracked the surcharge earned from these policies and tried to limit outside knowledge of the practices. The FTC stated the complaint alleges that Amazon's scheme has likely extracted tens of billions of dollars from its unwitting advertising customers.
Details of the Alleged Scheme
The artificial floor-setting allegedly pushed merchant ad costs up by as much as 50% during peak shopping events like Prime Day. The FTC claims Amazon's strategy raised the pay-per-click ad cost by 50% on major shopping days. According to internal documents cited by the regulator, Amazon executives said revealing the surcharges would cause irrevocable damage to advertiser trust and a downward spiral of lower bids.
FTC Chairman Andrew N. Ferguson stated the impact is staggering, claiming Amazon has millions of advertising customers who were misled into paying significantly higher prices. Ferguson claimed these higher costs were largely passed on to American consumers.
Amazon's Defense and Market Position
In a blog post, Amazon called the lawsuit misguided. The company pointed to its commitment to keeping costs low. Amazon stated that from 2019 through 2024, the average cost per click for its Sponsored Products search ads remained flat when adjusted for inflation. The company also said conversion rates grew 24% from 2021 to 2025.
Amazon said advertisers paid the same and got more as it meaningfully improved ad relevancy and therefore performance. The company claims its shift to AI and machine-learning ad models has saved advertisers over $8 billion during this period. Amazon also accused the FTC of cherry-picking outdated training materials and isolated employee emails.
Amazon's advertising business is a major profit driver. It is the third-largest digital ad platform behind Alphabet and Meta Platforms. Last quarter, Amazon's advertising business grew 26%, reaching $19.8 billion in revenue.
Regulatory Context and Prior Actions
The Federal Trade Commission's latest lawsuit is its third case against Amazon. In September of the prior year, the company paid $2.5 billion to settle allegations it deceptively tricked consumers into Amazon Prime subscriptions and made cancelling them excessively difficult. The new legal action focuses squarely on the practices within its advertising marketplace.
The case highlights ongoing scrutiny of major tech platforms' advertising practices and their effects on merchants and consumers. For more details on regulatory actions and corporate performance, you can review our stats and standings pages.
