Amazon investors got a jolt on August 31 when federal regulators filed a new lawsuit against the company. The stock dropped almost immediately, and some shareholders started asking whether it was time to head for the exits.
Jim Cramer had a blunt answer for anyone thinking about selling, and it doubles as a lesson in how markets tend to overreact to legal headlines before the facts are even sorted out.
Jim Cramer calls Amazon selloff hysterical even as it faces a new FTC lawsuit
The Federal Trade Commission and 22 state attorneys general sued Amazon on August 31, alleging the company secretly and systematically overcharged approximately 1.2 million advertisers by manipulating its ad auction pricing. The lawsuit alleges the scheme generated more than $20 billion in additional revenue for Amazon over roughly seven years, according to NBC News.
The complaint is centered on three ad products: Sponsored Products, Sponsored Brands, and Sponsored Display. The regulators allege Amazon told advertisers it was running a fair “second-price” auction while secretly adding a hidden markup internally referred to as a “soft reserve price,” starting in 2019.
According to the Wall Street Journal, Amazon stepped into its ad auctions to push up floor prices somewhere between 70% and 80% of the time in recent years, and the FTC alleged the strategy raised pay-per-click costs by 50% on major shopping days, Wall Street Journal reported.
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FTC Chairman Andrew Ferguson said the impact reached far beyond the advertisers themselves. “Amazon has millions of advertising customers who were misled into paying significantly higher prices,” Ferguson said. “These higher costs were largely passed on to American consumers,” CNBC reported.
Amazon pushed back firmly in a public blog post, calling the lawsuit misguided and asserting there was no harm to consumers. The company pointed to its long-standing pricing guidance for advertisers and said it continues to offer competitive rates across its ad products.
Why Cramer isn’t worried about this lawsuit
Amazon shares fell nearly 2% following news of the suit. Cramer addressed the reaction directly during the CNBC Investing Club’s “Morning Meeting” livestream on September 1. He drew a comparison to the Justice Department’s antitrust case against Google, arguing that investors may be overestimating the potential impact of the Amazon lawsuit, according to CNBC.
Cramer argued investors dumping the stock over the suit were overreacting. “You’re not being historical. You’re hysterical,” he said, framing the sharp reaction as disconnected from how these large antitrust and consumer protection cases actually tend to play out over time.
Cramer’s charitable trust owns Amazon stock. He disclosed that alongside his comments. That is worth knowing not because it makes him right, but because it means he is talking about a stock he actually holds, not one he is watching from a distance.
His comparison to Google’s own antitrust ordeal carries real weight. The Justice Department’s years-long case against Alphabet’s search business produced modest results, but the court rejected the government’s proposed Chrome breakup, leaving Google’s core business intact.
Wall Street has seen this pattern before. When the FTC first sued Amazon over separate monopoly allegations in 2023, one analyst at Wedbush said the firm would be “buyers of Amazon shares on any weakness related to the headlines of an FTC case,” arguing that a materially disruptive restructuring of Amazon’s business was unlikely, Benzinga reported.
Amazon’s business still looks strong heading into this fight
The lawsuit lands at a moment when Amazon’s underlying business is performing well by almost any measure. Second-quarter revenue reached $200.6 billion, up 20% year over year, marking the company’s first-ever quarter above the $200 billion mark, according to CNBC.
Advertising itself, the exact segment now under legal scrutiny, generated $19.8 billion in the same quarter, up 26% year over year. Amazon Web Services grew 37%, its fastest pace in 18 quarters. Shares jumped roughly 9% after hours following that report.
This is not Amazon’s first brush with FTC enforcement. The company agreed last year to a $1 billion civil penalty and a $1.5 billion consumer refund pool tied to separate allegations about its Prime subscription practices, TheStreet reported.
The settlement required changes to Amazon’s enrollment and cancellation processes but did not impose any structural breakup. Shares actually fell more than 3% when the FTC first sued Amazon over separate monopoly allegations back in 2023, and the stock went on to post strong gains over the following year.
There is also a separate monopoly case still working through the courts. That one targets Amazon’s marketplace practices rather than its ad business. It was originally headed to trial in October 2026 but got pushed to early 2027. Two major cases, neither close to a resolution.
What Amazon investors should watch next
For investors, the practical question is not whether the lawsuit’s allegations are serious, since regulators are seeking real penalties and structural changes to Amazon’s ad auction system. The more relevant question is whether litigation risk of this kind has historically moved Amazon’s actual earnings power, and so far the answer has consistently been no.
Cramer’s comparison to the Google antitrust case is worth taking seriously precisely because it highlights how long these cases typically take and how narrow their eventual remedies tend to be relative to the initial headlines. Advertisers affected by the alleged surcharges could eventually see refunds or rate adjustments, but a fundamental change to how Amazon runs its ad business remains a multi-year process at best.
Investors should watch how Amazon’s stock behaves over the next several trading sessions for signs of whether the initial selloff following the August 31 lawsuit announcement represents genuine repricing or the kind of headline-driven overreaction Cramer described. The company’s next earnings report will offer the clearest read on whether advertisers are actually pulling back spending in response to the allegations, which would be a far more meaningful signal than the stock’s day-one reaction.
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