Amazon.com stock dropped on Monday on news that the Federal Trade Commission filed a lawsuit against the e-commerce giant.

The FTC said in a press release on Monday that 22 states, including California, New York, Alaska, and Florida, have joined the commission in filing a lawsuit against Amazon, alleging that the company engaged in deceptive and unfair practices that secretly inflated prices in its online search advertising auctions.

The lawsuit alleges that for over seven years, Amazon increased the prices that more than one million brands and sellers were required to pay to advertise on its online platform. This likely led to Amazon receiving tens of billions of dollars from ad customers, the complaint adds.

"Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers," FTC Chairman Andrew Ferguson said in the press release.

Amazon stock dropped 2.9% to $258.85.

Amazon told Barron's that the lawsuit claims that the company misled advertisers about its Sponsored Ads pricing and auction.

"Amazon strongly disagrees," Amazon said.

"On any given day, we will review billions of bids to place ads on our site across many different placements and ad formats. No two auctions are entirely alike," Amazon said. The company added that "the FTC claims advertisers were harmed because they didn't understand how our auction worked and therefore overpaid. Not only do we properly describe our pricing and auctions to advertisers, but this claim fundamentally misunderstands how advertisers behave."

This will not be the first lawsuit between the FTC and Amazon in recent years. Amazon and the FTC reached a $2.5 billion settlement in September 2025 over allegations that the e-commerce giant tricked customers into signing up for Prime accounts.

The FTC also sued Amazon in September 2023, alleging that the company is a monopolist that uses anticompetitive actions to "stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing." That trial isn't set to begin until 2027.