Amazon has been quietly running one of the most lucrative scams in advertising history, according to the federal government. The FTC and a bipartisan coalition of 22 state attorneys general filed suit Monday, alleging Amazon "secretly and systemically overcharged" 1.2 million brands and sellers by rigging the very auctions it uses to sell ads. This is, to be clear, the third major federal lawsuit against Amazon in roughly two years.
What Amazon Is Accused of Actually Doing
Here's the scheme, as NPR reports the FTC laid it out: Amazon sells advertising on its website and app through auctions, which is pretty standard industry practice. You bid, the highest bid wins, everyone knows the rules. Except, according to the government's complaint, Amazon was secretly manipulating those auctions to extract more money from the brands and sellers who rely on the platform to get in front of customers.
The lawsuit, filed in U.S. District Court in Washington, argues that Amazon "deceived its customers and deprived them of the benefits of competition and fair and transparent dealing." When a company runs an auction and then secretly changes the results to pad its own revenue, that is not a market functioning properly. That is a protection racket with better branding.
The scale here is genuinely hard to wrap your head around. Amazon's advertising business pulled in almost $69 billion over 2025 alone, up 26% in the most recent quarter. It is now one of the largest advertising platforms on earth. A significant chunk of every dollar those 1.2 million sellers spent to reach customers on Amazon may have been padding Amazon's take rather than actually winning them better ad placement.
Amazon's Defense, Such As It Is
Amazon, for its part, says the FTC got it wrong. The company's response, published Monday, argues that regulators misrepresented how its ad auctions actually work and cherry-picked their findings to support a predetermined conclusion. Amazon also says the average cost-per-click of its ads stayed flat when adjusted for inflation, and that ad quality improved over the years.
Amazon also raises the point that the lawsuit offers no evidence of harm to shoppers. Which is technically a legal argument, but also a remarkable thing to lead with when your alleged victims are the million-plus small businesses and brands whose livelihoods depend on your platform. "We didn't hurt consumers" is not really the warm exoneration Amazon seems to think it is when the people allegedly getting fleeced are the sellers.
This is worth sitting with for a second. Amazon built a marketplace where sellers have almost no choice but to advertise. You want to compete on Amazon? You buy Amazon ads. And if the government is right, the auction system those sellers were trusting to be fair was being tilted against them the entire time.
The Lawsuit That Keeps Getting Bigger Company
Let's run the tape on Amazon's recent legal history, because it is genuinely extraordinary. In 2023, Amazon paid $30 million to settle FTC allegations that its Alexa voice assistant and Ring doorbell cameras violated user privacy. Also in 2023, the FTC and 17 states filed a massive antitrust lawsuit painting Amazon as a monopolist that suffocates competition and inflates costs for sellers and shoppers alike. That case is heading to trial early next year.
Then, just over a year ago, Amazon agreed to pay a historic $2.5 billion settlement over its Prime subscription program, which the government alleged was designed to trick tens of millions of people into signing up and then make canceling deliberately miserable. Two and a half billion dollars. For dark patterns on a cancel button.
And now this. A third major federal lawsuit. A bipartisan group of 22 state AGs piling on. Allegations of secretly rigging billions of dollars in ad auctions. At some point you have to stop calling these isolated incidents.
Why This Keeps Happening
Amazon is not facing serial federal lawsuits because regulators suddenly got aggressive. It is facing serial federal lawsuits because it built its empire on a series of business practices that, when examined closely by people with subpoena power, keep turning out to look a lot like fraud.
The common thread across the Prime case, the antitrust case, and now the ad auction case is the same: Amazon used its dominant position to extract money from people who had no real alternative. Cancel your subscription? We made that nearly impossible. Want to compete on our marketplace? You have to buy our ads. Trust our auctions to be fair? About that.
The FTC under the current administration has pursued Amazon aggressively, and the bipartisan nature of the coalition here, 22 state AGs from both parties, makes it hard to dismiss as a partisan witch hunt. These are not fringe grievances. Multiple governments across multiple legal theories keep arriving at the same basic conclusion about how Amazon operates.
The Dingo Take
Three federal lawsuits. A $2.5 billion settlement already in the books. Thirty million in privacy fines before that. And a company that made $69 billion from advertising alone last year. Amazon is not a company with a few bad apples in the compliance department. It is a company that appears to have built profit maximization so deep into its operating logic that the line between "aggressive business practice" and "fraud" became a technicality someone else would have to sort out later.
The advertising lawsuit matters beyond Amazon specifically, because this is how the whole digital ad economy works. Auctions that are supposed to be competitive. Platforms that are both the marketplace and a major competitor within it. Sellers who have no real exit option because the platform is where the customers are. If Amazon was secretly tilting those auctions, it was not a one-time lapse in judgment. It was a structural feature of a system designed to extract the maximum amount of money from people who had no leverage to push back.
Amazon will fight this. Amazon will argue the FTC cherry-picked data and misunderstood the technology and that competition was actually thriving the whole time. They have very good lawyers and they will make these arguments very expensively. But the government has now filed three major lawsuits against this company in the span of two years, and a coalition of 22 state attorneys general looked at the evidence and decided it was worth their time too. At what point does Amazon's "trust us, the auctions were fair" argument stop getting the benefit of the doubt?
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