WASHINGTON — The Federal Trade Commission and attorneys general from 22 states sued Amazon on Monday, Aug. 31, alleging the company concealed surcharges in its advertising auctions and raised costs for more than one million brands and sellers.
The complaint, filed in U.S. District Court for the Western District of Washington, seeks a permanent injunction, monetary relief and civil penalties. It targets Sponsored Products, Sponsored Brands and Display ads sold alongside search results on Amazon’s store and app.
Amazon denied the allegations, saying the case misunderstands how advertisers bid and how its auction prices are determined. The company said advertisers were properly informed about its pricing system.
Regulators challenge Amazon’s auction mechanics
The FTC says Amazon told advertisers it used generalized second-price auctions, in which the winning advertiser would pay one cent more than the next-highest bid rather than the full amount of its own bid. That structure gives buyers confidence to bid near what a placement is worth to them without expecting to pay the entire offer.
According to the complaint, Amazon began adding undisclosed “soft reserve prices” to Sponsored Brands auctions in late 2018, expanded the approach to Sponsored Products in 2019 and applied it to Display ads by 2023. Regulators allege the mechanism sometimes functioned as an invented auction participant, producing a higher price than advertiser competition alone would have set.
The FTC says the practice affected more than 500,000 small and midsize businesses and more than one million brands and sellers overall. The complaint alleges Sponsored Products advertisers paid their full winning bid close to 80% of the time in 2024, up from 30% to 40% in 2021 and 70% in 2022. Regulators estimate the disputed pricing generated tens of billions of dollars for Amazon.
Amazon says advertisers respond to real results
In a company response, Amazon called the lawsuit misguided and said reserve prices are common across digital advertising. It argued that sophisticated advertisers and automated bidding systems respond to actual outcomes, including cost per click, purchases and return on ad spend, rather than simplified descriptions of auction formats.
Amazon also said average cost per click remained stable from 2019 through 2024 while sales attributed to ad clicks increased. The company said the FTC drew broad conclusions from a small number of documents after reviewing more than 1.5 million pages of emails and other material.
The complaint presents allegations, not findings of liability. The FTC approved the action on a 2-0 vote, and the participating states can pursue civil penalties and other relief available under their laws.
Retail media pricing moves into the spotlight
For marketers and merchants, the case puts the mechanics of a major retail media marketplace under direct legal scrutiny. Amazon advertising is embedded in product discovery, marketplace visibility and seller economics, so changes to auction disclosures or pricing rules could alter campaign models, margins and performance benchmarks.
The immediate operational lesson is narrower: advertisers should examine whether their bidding tools and profitability models rely on an assumed auction format. The lawsuit does not itself change Amazon’s system, but it creates a public record that procurement, finance and media teams can use when evaluating costs and controls.
The case also broadens the regulatory focus on platform transparency. If the FTC prevails, the remedy could influence how large marketplaces describe reserve prices and other automated auction inputs to business customers. Until a court rules, Amazon’s denial and the regulators’ allegations remain in direct conflict.