FTC and states sue Amazon over alleged $20 billion ad auction overcharges
The Federal Trade Commission and 22 state attorneys general have filed a lawsuit accusing Amazon of inflating prices in its advertising auctions, allegedly extracting more than $20 billion from advertisers.
The Federal Trade Commission, together with a bipartisan coalition of 22 state attorneys general, filed a lawsuit in the U.S. District Court for the Western District of Washington alleging that Amazon has been overcharging its advertising customers for at least seven years. The complaint says Amazon replaced the results of its advertised-product auctions with higher, undisclosed prices, generating an estimated $20 billion in excess revenue.
According to the filing, internal documents show Amazon added a “soft reserve price” to its standard second-price (GSP) auctions beginning in 2019, effectively setting a hidden surcharge that advertisers paid above the auction-determined amount. The FTC says the practice was concealed from both advertisers and even some Amazon employees, and that the company only disclosed the reserve-pricing mechanism on its website in late 2025, nearly a year after learning of the investigation.
“Since 2019, Amazon.com, Inc. has secretly and systematically overcharged its approximately 1.2 million advertising customers by manipulating the ‘auctions’ that it uses to set the price of ads on its platform,” the lawsuit states.
“Based on numerous internal documents describing its ‘hidden’ ‘surcharges,’ Amazon’s scheme has likely illegally extracted over $20 billion from its unwitting advertising customers,” the complaint adds.
Amazon responded that the FTC’s allegations are “misguided” and that the agency relied on a limited set of communications. The company acknowledged using reserve prices but said they are intended to reflect market value and prevent ads from selling below cost. Amazon also contended that average cost-per-click rates remained flat after inflation adjustments and that its relevance-based auction system saved advertisers billions.
The FTC is seeking a permanent injunction to halt the alleged practices, along with civil penalties, restitution, and disgorgement. The agency also noted that while Amazon’s website now mentions reserve pricing, the disclosure does not fully explain the scope or operation of the hidden surcharge system.