Amazon faces $20 billion ad lawsuit as South African sellers pay for the same sponsored tools

Amazon is facing a US lawsuit alleging that it secretly increased advertising prices by more than $20 billion, raising questions for South African businesses paying to promote products on its marketplace.

• The US Federal Trade Commission and 22 states have sued Amazon over its advertising auctions.
• They allege that secret pricing systems cost advertisers more than $20 billion.
• Amazon denies misleading customers and says its changes improved advertising performance.
• South African sellers use the same categories of sponsored advertising, but there is no evidence that the disputed practices were applied locally.

The US Federal Trade Commission and 22 states accuse Amazon of telling advertisers that its sponsored advertisements were sold through a second-price auction while secretly applying reserve prices that could increase the amount paid for a click.

In a conventional second-price auction, the winner pays only slightly more than the next-highest qualifying bid.

The FTC’s 181-page complaint⁠ alleges that Amazon began overriding those results through undisclosed mechanisms and exploited businesses that sometimes submitted high maximum bids because they believed they would pay only what was necessary to win.

The claims are allegations. They have not been established in court.

Amazon denies deceiving advertisers and says its advertising systems provide value by helping businesses reach customers who are likely to buy their products.

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The company also says changes made between 2021 and 2025 saved advertisers approximately $8 billion.

Why South African sellers should pay attention

Amazon launched its South African marketplace in May 2024 and introduced Sponsored Products, Sponsored Brands, Sponsored Display and Stores two months later.

Those services allow qualifying sellers to bid for paid positions in search results, product pages and other parts of Amazon.co.za.

A South African business can therefore pay Amazon each time a customer clicks its advertisement, making auction prices an important part of the cost of selling through the platform.

There is no public evidence that South African advertisers were charged through the mechanisms challenged in the US lawsuit.

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Amazon operates marketplaces with different systems and commercial conditions. The company has not disclosed whether Amazon.co.za uses the reserve-pricing methods identified in the complaint.

That distinction is important. The existence of similar advertising products does not prove that South African businesses suffered any part of the alleged $20 billion loss.

The African angle is instead a transparency question: are local sellers told precisely how their advertising payments are calculated, and do the rules match the actual auction?

Advertising has become one of Amazon’s most profitable businesses. The company generated approximately $68.6 billion in advertising revenue in 2025, placing it behind only Google and Meta among the world’s largest digital-advertising platforms.

For small sellers, advertising can be difficult to avoid because paid products often occupy prominent positions above unpaid search results.

Higher advertising expenses can reduce merchants’ margins. Some businesses may attempt to recover the cost by increasing product prices, although the new lawsuit does not prove that Amazon’s practices raised consumer prices in South Africa.

The FTC is seeking monetary relief, civil penalties and restrictions on the disputed conduct. Amazon is expected to contest both the allegations and the calculation of losses.