Full Breakdown
Amazon Faces FTC and 22-State Lawsuit Over Alleged Ad Auction Overcharges
9/4/2026, 12:35:59 AM
Core Event: FTC and States Accuse Amazon of Hidden Surcharges
On August 31, the Federal Trade Commission (FTC) and attorneys general from 22 states filed a complaint in the U.S. District Court for the Western District of Washington. The complaint alleges that Amazon Inc. secretly altered its online advertising auctions beginning in 2019, inserting undisclosed “soft reserve” surcharges that turned many generalized second-price (GSP) auctions into first-price auctions. Regulators say the practice affected more than 1 million brands and marketplace sellers—over 500,000 of which are small- and medium-sized businesses—and may have extracted more than $20 billion in additional revenue.
Background & Context
Amazon’s ad platform markets Sponsored Products, Sponsored Brands, and Sponsored Display placements as GSP auctions, where the winner pays only a penny above the second-highest bid. Internal documents cited by the FTC describe a 2019 shift to a “soft reserve price” and the use of an “invented auction participant” that set a proxy second price after the auction closed. The FTC’s action follows earlier antitrust and consumer-protection suits against Amazon.
Data & Statistics
- Advertisers impacted: ~1.2 million (including >500,000 SMEs).
- Auction pricing shift: Full-bid payments rose from 30-40 % in 2021 to about 80 % in 2024.
- Financial scale: FTC estimates hidden surcharges generated > $20 billion; Amazon’s advertising revenue was ? $68 billion last year.
- Amazon’s claimed savings: $8 billion saved for advertisers (2021-2025) and a 50 % drop in average winning bids for Sponsored Products from 2019 to 2025.
Official Statements & Responses
- FTC Chairman Andrew N.
- New York Attorney General Letitia James called for a court order to bar the “illegal scheme.”
- California Attorney General Rob Bonta described the practice as “rigging billions of ad auctions.”
- Texas Attorney General Ken Paxton filed a parallel suit echoing the claim that Amazon extracted billions from advertisers.
- Amazon issued a blog post labeling the lawsuit “misguided” and arguing the FTC “fundamentally misunderstands how advertisers operate.” The company said advertisers adjust bids based on performance, CPCs stayed flat, and ad relevance improvements saved advertisers more than $8 billion.
Conflicting Reports & Gaps
- Financial impact: FTC’s $20 billion estimate contrasts with Amazon’s claim that advertisers saw no net cost increase and saved $8 billion.
- Auction metrics: FTC filings cite an 80 % full-bid rate in 2024; Amazon’s internal data suggest winning bids fell 50 % and CPCs remained stable.
- Evidence scope: Regulators rely on selected internal documents, while Amazon argues the FTC “cherry-picked” examples from a massive record.
Verbatim Quotes
- “Advertisers paid the same and got more as we meaningfully improved ad relevancy and therefore performance.” — Amazon, spokesperson
- “In over 150 pages, consumer harm is mentioned only a handful of times and is never substantiated with data,” — Amazon, internal communication
What's Next
The FTC is seeking a permanent injunction to halt the alleged pricing scheme, civil penalties, restitution, and disgorgement of profits. The case will proceed through the federal court system, with both parties slated to submit further evidence and arguments. No trial date has been set.
