Amazon shares fell after the U.S. Federal Trade Commission (FTC) and 22 states filed a lawsuit against the e-commerce giant, accusing it of manipulating advertising auctions to inflate prices.
The lawsuit targets Amazon's digital advertising business, a key growth area, alleging the company altered its auction system to increase advertiser costs, potentially generating tens of billions in revenue.
The FTC claims Amazon introduced a 'soft reserve' in its ad auctions, inflating final costs by inserting its own higher price. This practice allegedly led to over $20 billion in overcharges for around 1.2 million advertisers, with potential cost pass-through to consumers.
Amazon has rejected the allegations, describing the case as misguided. The company argues that its advertising system provides value to sellers and disputes the FTC's interpretation of its practices.
Amazon's advertising business, which generated $68.6 billion in 2025, is now under scrutiny, being the third-largest digital ad platform globally. The lawsuit has added to Amazon's regulatory challenges, with shares dropping 2.5% amid investor concerns over financial penalties and increased scrutiny.
Background
The FTC lawsuit adds to Amazon's regulatory challenges, highlighting the broader scrutiny of its market power and business practices.
The company's ability to sustain growth across its core business areas is now under question, with the legal case's development being closely watched.
