The Federal Trade Commission and 22 state attorneys general filed a lawsuit against Amazon on August 31, 2026 in the U.S. District Court for the Western District of Washington, alleging the company engaged in deceptive and unfair practices that secretly inflated prices in its online advertising auctions.
The complaint alleges Amazon used an internally invented "phantom bidder" to intervene in sponsored-product, brand and display advertising auctions after 2019 rule changes, artificially raising the prices advertisers paid without disclosing the practice, and claims the scheme cost advertisers roughly 20 billion dollars.
Why it matters
Amazon's advertising business has become one of its fastest-growing and most profitable segments, drawing scrutiny similar to what regulators have applied to Google's ad-tech stack. A bipartisan coalition of 22 states joining the FTC signals rare cross-partisan appetite to pursue Amazon over how it prices access to its retail search results, a market where sellers have little practical alternative to advertising on Amazon's own platform.
How it works
The complaint, brought under the FTC Act and state consumer-protection and antitrust statutes, alleges Amazon's auction system inserted a fictitious competing bid — the phantom bidder — to push winning bids higher than they would have been in a genuine auction, then charged advertisers based on that inflated clearing price rather than a price set by real competition among advertisers.
Evidence
The FTC's complaint, filed in federal court, cites internal Amazon documents that it says name and describe the phantom-bidder mechanism, and states the practice affected sponsored product, sponsored brand and display advertising placements dating back to changes Amazon made to its auction rules in 2019.
The competing read
The FTC and the joining states describe the case as another example of a dominant platform exploiting sellers who have no realistic alternative marketplace. Amazon has disputed the allegations and is expected to argue that its auction design reflects legitimate optimization of ad delivery rather than deception, a defense the company has used in prior disputes over its advertising and marketplace practices.
What happens next
The case will proceed through discovery in the Western District of Washington, where Amazon is headquartered, with the FTC seeking a permanent injunction, civil penalties and monetary relief for affected advertisers. The suit adds to a growing list of federal and state actions against Amazon, including the FTC's separate ongoing monopolization case, and will be watched as a test of how ad-auction transparency claims fare in court.