The Federal Trade Commission and a bipartisan coalition of 22 state attorneys general filed a 181-page lawsuit against Amazon today, accusing the company of secretly inflating advertising prices for more than seven years. The suit, filed in the U.S. District Court for the Western District of Washington, alleges Amazon misled advertisers about how its ad auctions actually worked while quietly manipulating prices behind the scenes.
California Attorney General Rob Bonta is among the officials who signed onto the case, framing it as a fight to shield small businesses from a company he says has outgrown fair play. In a post on X announcing the lawsuit, Bonta wrote that he was joining the FTC and a bipartisan coalition of AGs in suing Amazon for secretly, systematically, and illegally overcharging businesses that advertise on its platform, adding that Amazon rigs its advertising auctions to force businesses to pay more, inflating their own profits at the expense of small businesses. Bonta, who is based in Oakland, described himself in the post as protecting small and medium businesses from being taken advantage of by the multi-trillion-dollar company.
I’m joining the FTC and a bipartisan coalition of AGs in suing Amazon for secretly, systematically, and illegally overcharging businesses that advertise on its platform.
— Rob Bonta (@AGRobBonta) August 31, 2026
Amazon rigs its advertising auctions to force businesses to pay more, inflating their own profits at the… pic.twitter.com/Fnrj09Lwy7
At the heart of the complaint is a claim about how Amazon's ad auctions were supposed to work versus how regulators say they actually functioned. According to the Federal Trade Commission, Amazon told advertisers it ran a “second-price auction,” where the winning bidder pays just one cent more than the next-highest bid. Instead, the agency alleges, Amazon used hidden “soft reserve” prices and an “invented auction participant” to charge winners their full maximum bid in roughly 80% of auctions.
More Than a Million Sellers Allegedly Overcharged
State and federal regulators say the scheme was not a minor pricing quirk but a systemic overcharge that hit more than 1.2 million brands and sellers, including over 500,000 small- and medium-sized businesses. Per the New York State Attorney General, the alleged surcharges extracted more than $20 billion in illicit advertising revenue from sellers since 2019. Officials warned the effects rippled beyond the sellers themselves, with the North Carolina Department of Justice noting that inflated ad fees on everyday items like groceries, clothing, and household goods pushed sellers to raise their own retail prices — effectively passing the cost on to ordinary shoppers.
In California, Bonta's office is pursuing its own legal angle on the allegations. The California Department of Justice brought claims against Amazon under the state's Unfair Competition Law and False Advertising Law, seeking injunctive relief, civil penalties, disgorgement of profits, and restitution.
Amazon Calls the Lawsuit Misguided
Amazon pushed back hard against the allegations in an official response issued the same day. The company called the lawsuit “misguided” and “patently false,” arguing that its focus on ad relevancy actually saved advertisers $8 billion between 2021 and 2025, and that average winning bid prices for Sponsored Products fell 50% from 2019 to 2025, according to Amazon.
The stakes for Amazon's ad business are enormous. The unit has grown into the world's third-largest digital advertising platform behind Google and Meta, generating $68.63 billion in ad revenue in 2025 and reaching $19.81 billion in quarterly ad sales by the second quarter of 2026, per data compiled by YCharts. Investors reacted swiftly to the lawsuit: Amazon's stock fell more than 3% following the news, erasing roughly $86 billion in market value in a single afternoon of trading, according to BeInCrypto.
Part of a Broader Legal Campaign Against Amazon
This is not Bonta's only fight with the retail giant. In April, he released unredacted evidence from a separate 2022 California antitrust lawsuit pending in San Francisco Superior Court, alleging Amazon strong-armed vendors into artificially raising prices on competing platforms like Target and Walmart. Hoodline previously covered Bonta's push for a preliminary injunction in that same California case earlier this year.
Monday's ad-auction suit also marks the FTC's third major legal action against Amazon in recent years, following an ongoing 2023 monopoly case and a historic $2.5 billion settlement over deceptive Prime enrollment and cancellation practices, which began issuing customer refunds of up to $51 earlier in 2026, according to KPBS. Hoodline reported on that Prime settlement in an earlier refund story, and just weeks ago detailed a separate record fine against Amazon tied to identity theft disclosures. Taken together, the cases paint a picture of regulators on multiple fronts scrutinizing how Amazon treats the businesses and consumers that depend on its platform.
