FTC Sues Amazon Over Hidden Ad Auction Fee

The US Federal Trade Commission (FTC) and attorneys general from 22 states filed a lawsuit against Amazon on August 31, 2026, accusing the company of secretly inflating prices in its own advertising auctions for more than seven years and, in doing so, collecting more than $20 billion from over a million brands and sellers.

The suit targets the Sponsored Products, Sponsored Brands, and Display ad formats, the placements that sit at the very top of Amazon search results, where sellers bid against competitors for visibility next to rival products. For years, Amazon told advertisers it ran what is known as a second price auction, the standard model in digital advertising, in which the winner pays only one cent more than the next highest bidder. According to the complaint, the company instead charged winning bids in full in nearly 80 percent of cases.

Andrew Ferguson, chairman of the Federal Trade Commission, said in a statement on August 31 that “when one of the world’s largest online retailers resorts to unfair and deceptive practices, the consequences can be staggering.” He added that “Amazon has millions of advertising customers who have been deceived into paying significantly higher prices.”

What Is the “Soft Reserve Price”?

The complaint alleges that starting in 2019, without any public disclosure, Amazon introduced an undisclosed markup into its auctions that it referred to internally as a “soft reserve price.” On the highest traffic days, that markup allegedly pushed prices as much as 50 percent above what a genuine second price auction would have produced. Internal documents cited in the lawsuit describe how Amazon, according to one of its own executives, tested how far it could raise hidden charges before advertisers noticed, and kept raising them as the company grew confident that clients were not tracking the gap.

The FTC’s lawsuit was joined by, among others, California, New York, Florida, and North Carolina, along with 18 additional states: Alaska, Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington. New York Attorney General Letitia James said the FTC and the states are seeking a court order barring Amazon from continuing what she called an “unlawful scheme,” along with penalties, damages, and restitution for affected advertisers.

Amazon Pushes Back

Amazon called the lawsuit “misguided” and said in an August 31 statement that “the lawsuit fundamentally misunderstands how advertisers do business.” The company argues that average winning bids for sponsored products fell 50 percent between 2019 and 2025, and that even accepting the FTC’s framing, advertisers saved more than $8 billion between 2021 and 2025 because Amazon weighted ad relevance over bid size alone. The company also says the average cost per click stayed flat between 2019 and 2024, despite rising sales volume on the platform.

This is not the first major regulatory clash between Amazon and the FTC. The company previously agreed to pay a $2.5 billion settlement over allegations that it steered subscribers into Prime memberships and made cancellation difficult. Amazon generated $68 billion in advertising revenue in 2025, one of its fastest growing business lines, and its stock fell roughly 2.5 percent after the lawsuit was filed.

The case now moves to federal court, where Amazon will have to answer the hidden fee allegations before the same agency that already extracted a billion dollar settlement from the company once before.