FTC Alleges Amazon Overcharged Advertisers for Years

Federal regulators and 22 state attorneys general have sued Amazon, alleging the e-commerce giant secretly manipulated its advertising-auction systems and overcharged roughly 1.2 million advertisers by more than $20 billion since 2019. Amazon disputes the claims, calling the suit misguided and maintaining that its advertising tools have reduced advertiser costs.

The 181-page complaint, filed Aug. 31 in the U.S. District Court for the Western District of Washington, targets the pricing of Amazon’s Sponsored Products, Sponsored Brands and Sponsored Display ads. The FTC alleges the company represented that its ads were priced through competitive “second-price” auctions, while internally overriding the auction-determined price with higher charges that benefited Amazon.

The FTC’s allegations

In a traditional second-price auction, the winner generally pays only the minimum amount needed to beat the next-highest bidder. Amazon’s own materials allegedly told advertisers that a winning advertiser would pay an amount tied to the next-highest bid—often described as one cent more than that bid.

The FTC now contends that Amazon began changing the outcome of those auctions in late 2018 and early 2019. Rather than charging the price produced by competitive bidding, regulators allege Amazon imposed an undisclosed “soft reserve price” or internal proxy bid after the auction had run, raising the advertiser’s cost per click.

According to the complaint, Amazon continued to portray its process as a second-price auction even after allegedly introducing the higher internal price floors. The FTC says the company knew advertisers expected competitive, bidder-driven pricing and took steps to make the alleged surcharges difficult to identify in campaign reporting.

The agency alleges that Amazon’s conduct affected approximately 1.2 million U.S. advertising customers, including more than 500,000 small and midsize businesses. The alleged overcharges involved Sponsored Products—the company’s largest ad format—as well as Sponsored Brands and Sponsored Display placements.

Why the case matters

Amazon advertising has become an essential customer-acquisition channel for brands and third-party marketplace sellers. Amazon generated more than $68 billion in annual advertising revenue, primarily from ad placements on its retail website and app, according to the FTC complaint.

For sellers, the allegations strike at a fundamental issue of marketplace economics: whether the platform operating the advertising marketplace can both define the auction rules and intervene in prices without adequately disclosing the practice.

The FTC argues that higher ad costs can move through the distribution chain. Sellers facing larger cost-per-click charges may reduce marketing spending, accept lower margins, raise retail prices, or pursue some combination of those strategies. The complaint alleges that a significant share of Amazon sellers’ advertising expenses is ultimately passed to shoppers, including on everyday goods such as groceries, pharmacy products, apparel and school supplies.

That pass-through issue gives the lawsuit relevance beyond Amazon advertisers. It frames advertising-pricing opacity as a potential consumer-protection matter, not merely a commercial disagreement between a platform and the businesses that use it.

Amazon’s response

Amazon has denied wrongdoing. In a blog post cited by Reuters and CNBC, the company said the FTC’s interpretation misunderstands how advertisers use Amazon’s systems and disputed the premise that the practices harmed consumers.

The company said average advertiser cost per click was flat from 2019 through 2024 while sales generated from clicks increased. It also said its auction approach saved advertisers approximately $8 billion between 2021 and 2025 and that average winning bids for Sponsored Products search ads fell 50% from 2019 to 2025.

Amazon further said it has given advertisers information about auction and pricing practices through the core campaign-management tools they use and continues to update that guidance. The company said it expects to defend its practices in court.

The dispute therefore is likely to turn not simply on whether Amazon sought to optimize ad pricing, but on the extent to which its representations about auction design, price-setting and advertiser disclosures matched the mechanics of its systems.

Relief sought

The FTC alleges violations of Section 5(a) of the FTC Act, which prohibits unfair or deceptive acts or practices in commerce. The participating states also assert claims under their consumer-protection laws.

The plaintiffs are seeking a permanent injunction, monetary relief and other remedies. The state plaintiffs seek relief that may include restitution, refunds, disgorgement, civil penalties, attorneys’ fees and costs, depending on the laws of the respective states.

Reuters reported that the FTC intends to seek “tens of billions” of dollars in damages, although the final amount had not been set when the lawsuit was filed.

Compliance takeaway

For digital marketplaces, the Amazon case is a reminder that pricing disclosures cannot be evaluated solely through formal terms and conditions. Regulators are increasingly focused on the operational reality of automated systems—particularly where a company controls the marketplace, the data, the algorithmic rules and the charges imposed on business customers.

The central compliance questions raised by the complaint are straightforward:

• Does the platform’s stated pricing model accurately describe how final charges are calculated?

• Are reserve prices, algorithmic adjustments, proxy bids or other interventions disclosed clearly enough for customers to understand their economic effect?

• Can customers independently reconcile advertised auction rules with the prices actually charged?

• Are complaint-handling and reporting processes designed to surface pricing anomalies—or to obscure them?

For companies that use algorithmic pricing, auctions or automated fees, the case reinforces the importance of aligning public representations, internal documentation, customer-facing disclosures and system behavior. A gap between those elements can create exposure not only to contract disputes, but also to claims of deception, unfairness and unjust enrichment.