The Federal Trade Commission and 22 states sued Amazon yesterday, alleging that it has conducted a secret scheme to overcharge advertisers for seven years.

“Since 2019, Amazon.com, Inc. has secretly and systematically overcharged its approximately 1.2 million advertising customers by manipulating the ‘auctions’ that it uses to set the price of ads on its platform,” the lawsuit said. “Amazon represents, and advertisers believe, that competitive auctions set the prices for advertising on its leading e-commerce website. But, in reality, Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits.”

The FTC said it obtained internal documents and messages that reveal how Amazon secretly inflated auction prices for Sponsored Products, Sponsored Brands, and Sponsored Display advertisements that appear alongside results seen by consumers when they search for a product. The FTC investigation began in 2024.

“Based on numerous internal documents describing its ‘hidden’ ‘surcharges,’ Amazon’s scheme has likely illegally extracted over $20 billion from its unwitting advertising customers,” according to the lawsuit filed in US District Court for the Western District of Washington.

The FTC lawsuit was joined by a bipartisan group of 22 state attorneys general from Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington.

The lawsuit said Amazon has conducted “billions of rigged auctions,” imposing “hidden surcharges on advertisers almost every time a shopper clicks on an advertisement on the Amazon website. Amazon’s deception continues to this day” and deprives customers “of the benefits of competition and fair and transparent dealing,” the FTC said.