Amazon is pushing back against a new lawsuit by the FTC and 22 state AGs that accuses the company of secretly manipulating its Sponsored Ads auctions to get more money from advertisers.
In a forceful response published Monday, Amazon disputed the FTC’s suit and its characterization of the ad giant’s auctions, arguing its pricing system has actually helped advertisers by prioritizing relevant ads that improve campaign performance.
“There is no advertiser harm,” Amazon wrote, arguing that advertisers “paid the same and got more.” The company added that “in no scenario does an advertiser pay more than their bid.”
Why This Matters:
The dispute gets (hella) deep into the weeds of ad auctions, but the FTC’s allegation is essentially: Amazon told advertisers its Sponsored Ads auctions worked like second-price auctions, where competition between buyers helps determine what the winner pays. However, per the FTC, Amazon allegedly used undisclosed pricing mechanisms, including inserting an artificial second-place bid after the auction, to push what the winning advertiser paid higher. Amazon, of course, rejects the claim.
Amazon argues advertisers were always told their bids represented the maximum amount they could pay. It also acknowledges that some older educational materials described its auctions in overly simple or outdated ways, but says those materials had limited reach, were cherry-picked by the FTC, and don’t show that advertisers were conned.
Amazon also disputes that advertisers were financially harmed. It says inflation-adjusted CPCs were flat from 2019 to 2024, while conversion rates increased 24% from 2021 to 2025, and estimates its auction system saved advertisers more than $8 billion.
The FTC sees it very differently. “Amazon has millions of advertising customers who were misled into paying significantly higher prices,” FTC Chairman Andrew Ferguson said. “These higher costs were largely passed on to American consumers.”
Experts React:
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Our Take:
This is a fight over both auction mechanics and transparency. Amazon’s argument is essentially that advertisers set maximum bids, never paid more than those bids, and received better-performing ads. The FTC isn’t really disputing the bid cap. Its argument is that advertisers were led to believe competition determined the final price they paid, while Amazon was allegedly intervening behind the scenes to push that price higher.
FWIW, an auction can theoretically produce good advertiser outcomes while still raising questions about whether buyers were accurately told how their prices were being determined. Either way, we’ll see how this plays out. (PS, it’s been sometime since we had a massive Big Tech advertising-related lawsuit, so perhaps this was due.)
