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The Federal Trade Commission and 22 state attorneys general sued Amazon on Monday, alleging the company secretly rigged its advertising auctions to overcharge roughly 1.2 million advertisers by more than $20 billion since 2019.

The complaint, filed in the U.S. District Court for the Western District of Washington, targets Sponsored Products, Sponsored Brands and Sponsored Display — the ads that run alongside Amazon's search results. Regulators say Amazon changed its auction rules in 2018 without telling advertisers, inserting an internal "soft reserve" bid that pushed the minimum winning price above what rivals had actually offered. More than 500,000 of the affected advertisers were small or medium-sized businesses, the FTC said.

"Amazon has millions of advertising customers who were misled into paying significantly higher prices," FTC Chairman Andrew Ferguson said. New York Attorney General Letitia James said consumers were likely paying more "for everything from groceries to electronics" as a result.

Amazon rejected the claims outright. The company said the lawsuit was "misguided" and that it "fundamentally misunderstands how advertisers operate," arguing that its system prioritizing ad relevance over bid price alone saved advertisers more than $8 billion between 2021 and 2025.

Investors reacted before the FTC even filed. Amazon shares fell roughly 3% on Monday on an early Wall Street Journal report of the coming suit, and slipped further Tuesday after the complaint was made public.

It is the FTC's third major legal fight with Amazon in as many years, following a $2.5 billion settlement last September over Prime sign-up and cancellation practices. A separate FTC lawsuit accusing Amazon of illegally maintaining a retail monopoly is still pending and is scheduled for trial in 2027 — a case this new complaint does not touch.

The suit seeks civil penalties and restitution for advertisers. No trial date has been set.

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