Amazon built a hidden surcharge into its advertising auctions and used it to extract tens of billions of dollars from sellers since 2019, the Federal Trade Commission and 22 state attorneys general allege in a lawsuit filed August 31 in federal court in Washington state. The complaint says the company disguised the charge, which it called a “soft reserve price” internally, as ordinary auction competition rather than disclosing it as an added cost layered on top of what advertisers already agreed to pay. The 22 states joining the case span 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, according to the FTC’s release.
What the FTC and the states say the “soft reserve” actually did
According to the FTC’s August 31 announcement, Amazon’s ad auctions were supposed to run on a standard second-price model, in which the winning advertiser pays roughly what the next-highest bidder offered rather than its own full bid. The complaint alleges Amazon instead inserted what it internally called a “soft reserve price,” described in the release as functioning like an “invented auction participant” that pushed the price paid closer to the winner’s own top bid rather than the true next-highest competing bid.
The FTC and the states say that mechanism let Amazon capture a bigger share of what advertisers were willing to pay without telling them the auction rules had effectively changed. The complaint alleges the winning-bid share affected by the surcharge rose from between 30 and 40 percent in 2021 to close to 80 percent by 2024, a shift the agency characterizes as evidence the practice expanded steadily rather than remaining a minor feature of the ad system. The FTC’s release does not say what triggered that increase or whether Amazon adjusted the surcharge’s design between 2021 and 2024.
When a charge hides in a fee line: The fraud evidence and report log and the first-hour recovery plan cover what a consumer does after spotting an unexplained charge on a statement: record it, then report it in the right sequence. Both are part of The Senior Fraud Defense & First-Hour Recovery Kit.
The internal words the FTC says describe the scheme
The complaint quotes an internal Amazon characterization of the practice as a “clever non-transparent way to charge first price,” which the FTC’s release also says Amazon internally called an “incredibly effective way to drive revenue.” The agency’s decision to quote those specific phrases in its own announcement signals that internal company language, not only the pricing data, forms part of the evidence the FTC and the states are relying on to allege the surcharge was deliberately concealed rather than an unintended side effect of how the auction software worked. The release does not identify which internal team or executive is quoted using those phrases, describing the language only as Amazon’s own internal characterization of the mechanism.
FTC Chairman Andrew N. Ferguson said in the release that “Amazon has millions of advertising customers who were misled into paying significantly higher prices,” a statement that frames the alleged harm as falling on the advertisers, mostly third-party sellers who pay Amazon to promote listings, rather than directly on shoppers making purchases. Ferguson’s statement does not put a specific dollar figure on how much any individual advertiser is alleged to have overpaid, leaving the tens-of-billions total as an aggregate across the advertiser base rather than a per-advertiser estimate.
Twenty-two states joined the FTC in filing the case in the U.S. District Court for the Western District of Washington, where Amazon is headquartered, adding state consumer-protection and antitrust claims alongside the FTC’s federal allegations. The FTC’s release does not specify how any eventual settlement or judgment would be divided between federal and state recoveries, or when advertisers might see any of it.
Why the effect on sellers is not necessarily the effect on shoppers
The lawsuit’s allegations concern money moving from advertisers, primarily the third-party sellers who list products on Amazon’s marketplace and pay to have them shown more prominently, to Amazon itself. Advertising costs are one factor sellers can build into what they charge for a product, but the FTC’s release does not quantify how much, if any, of the alleged tens of billions in surcharges sellers passed along in the prices shoppers ultimately paid.
That distinction matters because the case, as filed, is a complaint, not a finding of liability. Amazon has not yet had to answer the allegations in court, and the FTC’s release does not include a response from the company or a timeline for when a trial or a settlement might resolve the claims. Whether the “tens of billions” figure holds up, and what portion of it, if any, is ultimately returned to advertisers, remains for the litigation to determine.
The case adds to a run of FTC actions against major online platforms over pricing practices, though the FTC’s own release frames this complaint specifically around the ad-auction mechanics rather than Amazon’s broader marketplace or Prime subscription practices, which have been the subject of separate agency actions in recent years.
The FTC’s complaint asks the court for both an order stopping the alleged practice and monetary relief, though the release does not specify a dollar amount the agency and states are seeking, leaving the tens-of-billions figure as the alleged scope of the conduct rather than a stated demand in the filing.
A surcharge that never showed up as a line item
An advertiser charged an amount it cannot verify against the auction rules it was told governed the bidding, as the FTC and the states allege happened here, faces a version of the same documentation problem as anyone trying to show a charge on an account statement was never properly disclosed, whether the account is a business ad budget or a personal one.
The Senior Fraud Defense & First-Hour Recovery Kit includes a fraud evidence and report log and the free credit-freeze steps for tracking charges and disputes tied to an account statement.
Check the fraud evidence and report log in The Senior Fraud Defense & First-Hour Recovery Kit.
This article was researched and drafted with the assistance of AI and reviewed by The Money Overview editorial team.
