FTC and 22 states accuse Amazon of inflating ad prices
The Federal Trade Commission and 22 states sued Amazon on August 31, 2026, alleging that the company used undisclosed mechanisms to increase prices in its online advertising auctions.
The complaint, filed in the U.S. District Court for the Western District of Washington, targets Amazon’s Sponsored Products, Sponsored Brands and Sponsored Display advertising products. The lawsuit is not a final ruling, and the allegations have not been proven.
What the FTC alleges
The FTC and the states say Amazon represented its advertising auctions as generalized second-price auctions. Under that model, the winning advertiser generally pays the minimum amount needed to beat the next bidder rather than automatically paying the full amount of the winning bid.
The complaint alleges that Amazon began using undisclosed reserve-price surcharges in 2018 or 2019 and continued describing the system as a second-price auction. It says those mechanisms, including what Amazon internally called a “soft reserve,” could cause advertisers to pay their own winning bids or amounts close to them.
The FTC alleges that Sponsored Products advertisers paid their full winning bid approximately 80% of the time by 2024. That figure is an allegation in the complaint, not an adjudicated finding.
The complaint alleges that about 1.2 million U.S. advertising customers were affected, including more than 500,000 small and midsize businesses. It also alleges that the conduct likely extracted more than $20 billion from advertisers.
Why the auction rules matter to sellers
Sponsored advertising is a major way for brands and marketplace sellers to gain visibility on Amazon. Changes in auction pricing can affect campaign budgets, cost per click, return on ad spend, product margins and the ability of smaller businesses to compete for attention.
For a seller, the issue is not whether an advertiser could be charged more than its maximum bid. Amazon says advertisers never pay more than their bids. The FTC’s theory is that Amazon manipulated the price within or near that ceiling while allegedly failing to disclose how reserve mechanisms affected the auction.
The complaint also alleges that some higher advertising costs could have been passed through to consumers through higher product prices. Amazon disputes that theory, and the lawsuit does not establish that shoppers paid a measurable surcharge.
Amazon’s response
Amazon denies that it deceived advertisers. The company says reserve prices are common in advertising markets and that its auctions combine a bid with relevance-based ranking to improve results for shoppers and advertisers.
Amazon describes a “soft reserve” as a real-time minimum intended to reflect the value of an ad placement, and a “hard reserve” as the minimum a bid must exceed to enter an auction. Amazon says an advertiser whose bid clears both reserves may pay the soft reserve, while an advertiser whose bid clears the hard reserve but not the soft reserve may pay its bid. In no case, the company says, does an advertiser pay more than its bid.
Amazon also says the FTC relies on simplified or outdated training and marketing materials, and that advertisers’ average cost per click remained flat after adjusting for inflation while ad performance improved. The company disputes the claim that its practices raised consumer prices.
That leaves a central dispute for the court: whether Amazon adequately disclosed how reserve prices and relevance-based ranking affected what advertisers paid, or whether those tools were used in a way that contradicted the auction model presented to customers.
What is established and what is not
The established facts at this stage are that the FTC and 22 states filed a complaint on August 31, 2026, in federal court in Washington, identified three Amazon advertising products and asked the court to address the alleged conduct.
Liability, damages, consumer harm and any remedy remain unresolved. The complaint’s customer counts, small-business count, approximately 80% figure and more-than-$20-billion estimate are claims made by the government and states, not findings entered by a court.
What happens next
The case is expected to proceed through additional court filings and potentially discovery. The lawsuit does not currently create a refund process, claim deadline or compliance requirement for Amazon advertisers.
Sellers and brands may nevertheless want to preserve campaign records and review historical bids, cost-per-click data, return-on-ad-spend reports and related documentation. Those records could help businesses understand their advertising costs as the court considers the allegations.
Sources
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