The news
On August 31, 2026, the Federal Trade Commission and 22 states filed an Amazon ad auction lawsuit, alleging Amazon.com (AMZN) secretly added surcharges to its search-ad auctions starting in 2019 that likely took more than $20 billion from advertisers.
The complaint, filed in the U.S. District Court for the Western District of Washington in Seattle, says Amazon told advertisers it ran second-price auctions, in which the winner pays one cent more than the next-highest bidder. The FTC alleges that Amazon instead charged Sponsored Products advertisers their own winning bid close to 80% of the time, in effect turning the auctions into first-price auctions, where winners pay what they bid.
The difference matters because bidders in second-price auctions tend to bid closer to what a click is really worth to them, the FTC said. According to the complaint, the mechanism was an undisclosed surcharge Amazon called internally a soft reserve price; Amazon's internal documents indicate it began applying these to Sponsored Products search placements in July 2019. The FTC said the complaint quotes internal references to a proxy second price that Amazon calculated and an invented auction participant, which the agency likens to shill bids. It alleges Amazon raised surcharges further on peak days such as Prime Day and Black Friday and hid the changes.
According to the FTC, the complaint alleges that the share of the time Sponsored Products advertisers paid their full bid rose from between 30% and 40% in 2021 to 70% in 2022 and about 80% in 2024. The complaint puts the affected base at about 1.2 million U.S. advertising customers, including more than 500,000 small and midsize businesses, and says Amazon generates more than $68 billion a year in advertising revenue.
The complaint brings five counts under the FTC Act, for misrepresentations, deceptive auction manipulation, concealment, unfair omissions and unfair billing, plus claims under each state's consumer protection laws. It seeks a permanent injunction and monetary relief, and the states also seek civil penalties, restitution and disgorgement. The commission voted 2-0 to file. FTC Chairman Andrew N. Ferguson said advertisers were "misled into paying significantly higher prices."
Amazon called the suit misguided in a post the same day and said it strongly disagrees. The company said no advertiser pays more than its bid, that soft reserves reflect what a placement is worth and are common across the industry, and that inflation-adjusted cost per click for Sponsored Products search ads was flat from 2019 through 2024. It estimated that its focus on ad relevance saved advertisers more than $8 billion from 2021 to 2025.
The numbers
- Alleged overcharges since 2019, per the complaint
- Likely over $20 billion
- Advertising customers, per the complaint
- About 1.2 million, including 500,000+ small and midsize businesses
- States joining the FTC
- 22
- Sponsored Products auctions where winners paid their own bid, per the FTC
- 30-40% (2021), 70% (2022), about 80% (2024)
- Amazon annual ad revenue, per the complaint
- More than $68 billion
- Advertiser savings from relevance ranking, 2021-2025, per Amazon
- Over $8 billion
Why CEOs should care
For CMOs and retail media buyers, the core allegation is about how prices were set, not whether the ads worked. Pull Amazon Ads reports from 2019 onward and compare actual cost per click with maximum bids, especially around Prime Day and Black Friday. If winning clicks often cost close to the full bid, ask your Amazon account team and your agency how soft and hard reserve prices apply to your campaigns, and whether your bidding strategy assumed second-price rules.
For CFOs, these are allegations Amazon disputes, and nothing is owed yet. But Amazon's own response notes that the plaintiffs' proposed redress would go to advertisers, not shoppers. Finance teams at brands and sellers should preserve invoices, bid logs and contract terms now, so they can document spending if a court orders monetary relief or a settlement creates a claims process.
For boards and general counsel, the case tests how closely a platform's public descriptions must track its pricing algorithms. The FTC says Amazon's representations appeared on its website, in training videos and in sales presentations. Any company that runs auctions, dynamic pricing or usage-based billing should check that its help pages and sales materials still match how its systems actually set prices.
The bigger picture
Retail media means the ads that retailers sell on their own sites and apps. Marketing Dive described Amazon's ads business as the third-largest digital ad platform, behind Google and Meta. Bloomberg, in a report republished by Claims Journal, cited company filings showing $68.6 billion in Amazon ad revenue in 2025 and an eMarketer estimate of 21.4% growth to $83.3 billion in 2026. Marketing Dive quoted eMarketer principal analyst Zak Stambor as saying the allegations raise questions about Amazon's transparency and whether advertisers paid more than they realized.
The suit adds to Amazon's disputes with the FTC. Bloomberg reported that Amazon agreed in 2025 to pay $2.5 billion to resolve a separate probe of its Prime subscription practices, and Marketing Dive's September 1, 2026, report said the agency's monopoly case over Amazon's online retail business is set to go to trial in 2027.
What happened next
On September 1, 2026, Bloomberg Law reported that Amazon had lined up a defense team including Karen Dunn and Jeannie Rhee of Dunn Isaacson Rhee and William Savitt of Gibson Dunn. On September 8, Alden Abbott, a senior research fellow at George Mason University's Mercatus Center, wrote on the Truth on the Market blog that the FTC may have a viable deception claim but offers little evidence that retail consumers paid more.
Through September 29, Tech CEO Daily found no reported ruling or formal Amazon response to the complaint. Watch for Amazon's answer or motion to dismiss, the court's scheduling order, and any private advertiser suits that draw on the internal documents quoted in the complaint.
