Amazon's stock slips as the FTC alleges billions of dollars in hidden ad fees

By Christine Ji

Regulators claim Amazon artificially bumped up floor prices during peak shopping periods, adding surcharges to merchants' ad spending

Amazon's advertising business generated $19.8 billion in revenue last quarter.

Shares of Amazon.com fell 2.5% on Monday following news that the Federal Trade Commission is looking to crack down on the company's lucrative digital-advertising business.

The FTC and 22 states plan to file a lawsuit against Amazon (AMZN) alleging that the company manipulated prices paid by marketplace merchants and caused billions of dollars in harm. The Wall Street Journal first reported the news on Monday, and the FTC subsequently confirmed it in a statement.

FTC officials say Amazon has secretly inflated the minimum prices required to win ad placements, intervening in auctions to raise prices 70% to 80% of the time. Amazon officials allegedly tracked the "surcharge" earned from these policies and tried to limit outside knowledge of these practices.

"The complaint alleges that Amazon's scheme has likely extracted tens of billions of dollars from its unwitting advertising customers," the FTC said.

This artificial floor-setting reportedly pushed merchant ad costs up by as much as 50% during peak shopping events such as Prime Day, when sellers naturally expected higher costs driven by holiday competition. Amazon's strategy raised the pay-per-click ad cost by 50% on major shopping days, the FTC claims.

According to internal documents cited by the regulator, Amazon executives said that revealing the surcharges would result in "irrevocable damage to advertiser trust" and a "downward spiral" of advertisers lowering their bids, which would result in the company losing revenue.

"When one of the world's largest online retailers engages in unfair and deceptive conduct, the impact can be staggering," FTC Chairman Andrew N. Ferguson said in a statement. "Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers. The FTC under President Trump won't allow this deception to continue."

In a blog post responding to the FTC, Amazon called the lawsuit "misguided," pointing to the company's commitment to keeping costs low for both consumers and advertisers.

"From 2019 through 2024, the average cost per click for Amazon's Sponsored Products search ads remained flat adjusted for inflation, while conversion rates grew 24% from 2021 to 2025. Advertisers paid the same and got more as we meaningfully improved ad relevancy and therefore performance," Amazon said. The company claims that the shift to artificial intelligence and machine-learning ad models has saved advertisers over $8 billion during this time period.

Amazon also accused the FTC of cherry-picking outdated training materials and isolated employee emails.

Amazon's advertising business has steadily grown in recent years, becoming a high-margin profit driver and the third-largest digital ad platform behind Alphabet (GOOGL) (GOOG) and Meta Platforms (META). Last quarter, Amazon's advertising business grew 26%, reaching $19.8 billion in revenue.

This represents the FTC's third case against Amazon. Last September, the company paid $2.5 billion to settle allegations that it deceptively tricked consumers into Amazon Prime subscriptions and made cancelling them excessively difficult.

-Christine Ji

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08-31-26 1824ET