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The Federal Trade Commission and attorneys general from 22 states filed suit against Amazon on August 31, alleging the company secretly inflated prices in its online advertising auctions for more than seven years while telling advertisers it ran a fair, competitive system. The complaint alleges Amazon covertly increased what more than one million brands and sellers were required to pay to advertise on its platform, extracting what regulators say has likely amounted to tens of billions of dollars. According to the complaint, the alleged surcharges were not applied evenly — they were “ramped up” hardest on high-volume shopping days including Prime Day and Black Friday. The allegations are contested claims, not adjudicated findings, and Amazon had not filed a public response as of the complaint’s filing.
What the Complaint Alleges Amazon Did
For years, the complaint alleges, Amazon told prospective advertisers it ran a “generalized second-price,” or GSP, auction — the industry-standard format in which the winning bidder pays only one cent more than the next-highest bid, encouraging advertisers to bid closer to their true value. Beginning in 2019, according to the complaint, Amazon allegedly changed its auction pricing without telling advertisers, adding an undisclosed charge it referred to internally as a “soft reserve price” and using what internal documents call an “invented auction participant” to push prices above what real bidder competition would have produced.
The complaint alleges the change was effective: advertisers running Sponsored Products campaigns allegedly ended up paying their own full winning bid close to 80 percent of the time by 2024, up from an estimated 30 to 40 percent in 2021 and 70 percent in 2022 — turning what was marketed as a second-price auction into something closer to a first-price one. One internal document quoted in the complaint allegedly described the mechanism as “a surcharge hidden in it,” and an Amazon Ads executive is quoted describing the price advertisers paid as a “proxy 2nd price that we calculate,” rather than one set by an actual competing bidder.
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The Alleged Timing Around Prime Day
The complaint alleges Amazon’s surcharge was not a flat add-on but a lever the company adjusted around its highest-traffic sales events. Investigators say internal documents show Amazon “carefully ramps up surcharges” heading into high-volume shopping days like Prime Day and Black Friday, allegedly to capture more revenue precisely when advertiser competition, and consumer shopping traffic, peaks. FTC Chairman Andrew Ferguson said in a statement announcing the suit that “Amazon has millions of advertising customers who were misled into paying significantly higher prices,” adding that “these higher costs were largely passed on to American consumers.”
That pass-through claim is central to why the FTC frames this as a consumer protection matter and not simply a business-to-business advertising dispute. Sellers who pay more to advertise on Amazon, the theory goes, build that cost into the price of the product itself, so an undisclosed ad surcharge on one side of the platform allegedly shows up as a higher shelf price on the other. The complaint alleges Amazon knew this dynamic and, according to internal documents cited in the filing, avoided disclosing the change because doing so risked “irrevocable damage to advertiser trust” and a “downward spiral” in ad revenue.
How the Case Moves Forward
Twenty-two states joined the FTC in the filing: Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont and Washington. The complaint was filed in the U.S. District Court for the Western District of Washington after a 2-0 Commission vote authorizing FTC staff to bring the case, and it identifies more than 500,000 small and medium-sized businesses among the advertisers allegedly affected by the surcharge scheme.
Filing a complaint opens a civil case rather than settling one; every claim above describes what the FTC and the states allege, not what a court has found. Amazon can contest each allegation, including the characterization of its “soft reserve price” mechanism and the scale of harm the government estimates. The case now proceeds through the ordinary federal litigation process, part of the FTC’s broader enforcement docket against Amazon, where a judge — not the FTC — will ultimately decide whether the alleged conduct violated consumer protection law.
What the Government Wants From the Case
The complaint does not ask only for a finding of wrongdoing; as is standard in FTC Act enforcement filings of this kind, it seeks a permanent injunction barring Amazon from continuing the alleged pricing practice, along with monetary relief tied to the disputed auction changes. Because the case was brought jointly by the Commission and 22 state attorneys general, any eventual settlement or judgment would need to address remedies at both the federal and state level — a two-track structure that adds time to how these joint cases typically resolve. No settlement or fund exists yet; the complaint is a starting filing, not a resolved case, and the FTC has not published a timeline for how long the litigation is expected to run.
The alleged conduct the complaint describes runs from 2019 through the present, meaning advertisers who paid Amazon’s Sponsored Products auction pricing at any point in that window are, according to the government’s theory, among those potentially affected — not just those who advertised during a single year or a single Prime Day. Nothing in the complaint or the FTC’s announcement promises advertisers a refund, credit or other compensation while the case is pending; any relief would depend on the outcome of the litigation itself, whether by settlement or a judge’s ruling, and the agency has given no indication of when that outcome might come.
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This article was researched and written with AI assistance and reviewed for accuracy against primary sources.
