The Federal Trade Commission (FTC) and 22 state attorneys generals are suing Amazon alleging the company secretly overcharged advertisers in its search ad auctions for more than seven years. The suit was filed in the Western District of Washington.
What did Amazon allegedly do?
Amazon told advertisers it was running a fair deal. Bid what you’re genuinely willing to pay, and you’ll only ever be charged one cent more than the next highest bidder. That’s called a second-price auction, and it’s the model most of the ad industry has used for years, because it means nobody has to bid cautiously or play games.
According to the complaint, that’s not quite what Amazon actually did. It alleged that starting in 2019, the company quietly added something internal documents call a “soft reserved price”. Regulators allege this was effectively an invented bidder that didn’t exist, used to push the final price higher. So instead of paying a cent more than a real competitor, advertisers allegedly ended up paying close to the full amount of their own bid. The complaint claimed that by 2024, this was happening about 80% of the time, up from just 30 to 40% in 2021.
Who’s affected?
More than a million brands and sellers, per the complaint, including over 500,000 small and medium-sized businesses.
How much money are we talking about?
Tens of billions of dollars, according to the FTC, was extracted gradually across ordinary shopping days and more aggressively during peak periods like Prime Day and Black Friday.
Which ad products were involved?
Three are named in the complaint: sponsored products, sponsored brands and display ads. These are the ads that show up when you search for something on Amazon or browse product pages — the ones marketers pay for to increase the likelihood of someone seeing their listing. If you’ve ever scrolled past a product tagged “sponsored” while shopping on Amazon, that’s the auction at the center of this case.
Why does the auction type matter so much?
Because it changes how marketers bid. If you know you’re in a real second-price auction, you can bid your maximum without worrying about overpaying, since the system caps what you actually get charged. If you’re in a first-price auction, where you pay exactly what you bid, you learn over time to bid lower than your true value, so you don’t get stuck paying your own top number every time.
The alleged scheme worked precisely because advertisers thought they had that protection when they didn’t. The complaint quotes an internal Amazon document saying advertisers ended up bidding far higher than they actually intended to pay, because they believed the auction type protected them from that outcome.
Did Amazon know this was a problem?
The complaint said yes. It alleged Amazon deliberately timed surcharge increases to avoid detection, gave misleading answers when advertisers asked directly if the auction format had changed, and internally acknowledged that disclosure would cause “irrevocable damage to advertiser trust.”
What has Amazon said?
A lot as it turns out. Amazon has rejected the lawsuit outright, calling it “misguided” and disputes pretty much every part of it. Its core argument is that nobody got overcharged. Amazon said the average cost of Sponsored Product ads stayed flat, adjusted for inflation, from 2019 through 2024, while the ads themselves got better at reaching relevant shoppers. It also says roughly 92% of winning ads in 2024 weren’t even the highest bid, since Amazon rank ads ads on relevance as well as price. As for the case’s evidence, Amazon said the FTC is leaning on a small handful of outdated training materials and stray internal emails that barely anyone saw, not proof of a company-wide scheme.
Read Amazon’s full response here.
What happens now?
The case proceeds through the federal court in Washington state.
Why should marketers care?
Setting aside the small matter of an alleged multi-billion dollar bait and switch, this is the first time regulators have gone after auction mechanics inside a closed retail media platform, rather than the open programmatic supply chain that’s usually where these fights happen. Expect marketers to start asking other retail media networks the same question: does your second-price auction actually work the way you say it does?
How does this compare to the Google ad tech antitrust case
The two cases look similar on the surface but they’re not really the same fight.
Google’s case came from the Department of Justice and a group of states, not the FTC and its monopoly power. A judge ruled last year that Google illegally controlled too much of that ad tech market by looking at its own products together and shutting out competitors. That’s a case about who owns and controls the pipes ads flow through. The judge is still deciding whether Google has to sell off parts of its business.
Amazon’s case isn’t about owning too much of anything. Nobody’s arguing the e-commerce giant has a monopoly. The claim here is simpler. Amazon said its auction worked one way and allegedly ran it another. Google could end up broken into pieces. Amazon is more likely looking at fines, refunds to advertisers and a court order to stop the shady pricing since the whole complaint rests on deception rather than domination.
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