Sept. 1 (UPI) — A coalition of 22 states joined a Federal Trade Commission suit against Amazon alleging “deceptive and unfair practices,” secretly gaming the prices advertisers ended up paying in search results auctions to appear on Amazon.com and its mobile app.

The FTC, in a news release Monday, alleged that the platform “covertly and substantially increased” costs for more than a million brands and sellers to advertise on its platform over a seven year period, costing them tens of billions of dollars, most of which was passed onto consumers.

Filed in Federal Court in Amazon’s home state of Washington, the complaint alleges that numerous internal documents describing Amazon’s “hidden” surcharges indicated the practice had “likely illegally extracted over $20 billion dollars from its unwitting advertising customers.”

The auctions involved advertisers bidding to place Sponsored Product ads, Sponsored Brands ads and Display Ads alongside the results generated from “keyword” consumer searches in Amazon’s online shop, according to the FTC.

It said ad placements go the highest bidder for each keyword but participants were allegedly encouraged to submit high maximum bids to ensure success in the auction on the basis the final “winning” price they would pay would only be 1 cent more than the next highest bid — not their maximum bid.

Amazon in fact charged its Sponsored Products advertisers their own winning bid close to 80% of the time, effectively converting “its nominally ‘second price’ auction into a first price auction,” according to the complaint.

The complaint cites an in-house explanation by the executive in charge of Amazon Ads in which he said the price advertisers paid “isn’t set by an actual bidder” but by a “proxy 2nd price that we calculate” and another document where Amazon acknowledges using an “invented auction participant” to hike prices.

The “invented auction participant” and its hidden “proxy 2nd price” bids were effectivly shill bids, states the complaint, which also quotes another Amazon staffer saying the surcharges enabled the firm to achieve prices “beyond what [can] be achieved through advertiser competition.”

The FTC said that many as 500,000 of the advertisers that fell victim to the alleged scheme were small- and medium-sized businesses.

“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering. 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,” said FTC Chairman Andrew Ferguson.

Amazon rejected the allegations in a statement, saying that the agency’s argument that the case was about higher prices for consumers was patently incorrect because the company’s approach to pricing “contradicts any suggestion of consumer harm.”

“We provide customers the lowest prices every day across the widest selection of products, and work to ensure our retail and grocery prices meet or beat those offered by other retailers,” the firm said, adding that deals, coupons, and its Subscribe & Save program saved customers an average $230 a year.

“The FTC’s own complaint cites no evidence of consumer price increases, and consumers are only mentioned a handful of times in over 150 pages,” said Amazon.

It also argued advertisers were not harmed either, citing that the inflation-adjusted average cost-per-click for Amazon’s Sponsored Products search ads between 2019 and 2024 remained flat while the rate of views-to-sales grew 24% from 2021 to 2025.

“Advertisers paid the same and got more as we meaningfully improved ad relevancy and therefore performance,” said Amazon.

Amazon also said average winning bids fell by half from 2019 to 2025 and challenged the suit’s allegations regarding highest winning bids, saying it prioritized the relevancy of the ad over the price bid 92% of the time when selecting an ad, with estimated savings for advertisers more than $8 billion between 2021 and 2025.

The suit seeking an injuction to halt the alleged practice, damages, “and other relief” is being brought by the FTC and the attorneys general of 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.