FTC, 22 US States Sue Amazon Over Alleged Hidden Advertising Surcharges

The US Federal Trade Commission (FTC) and attorneys general of 22 states have sued Amazon, alleging that the company secretly inflated prices in its online advertising auctions, potentially extracting tens of billions of dollars from advertisers.

The complaint, filed in the US District Court for the Western District of Washington, alleges that Amazon misled more than one million brands and sellers by claiming its Sponsored Products auctions followed a “second-price” model, where the winning bidder pays only slightly more than the next-highest bid.

According to the FTC, Amazon introduced an undisclosed “soft reserve price” in 2019, effectively converting the auctions into first-price auctions. The complaint alleges that advertisers paid their own winning bids nearly 80% of the time in 2024, compared with 30–40% in 2021.

The FTC said the alleged scheme increased advertising costs for businesses, including more than 500,000 small and medium-sized enterprises, with higher costs potentially passed on to consumers.

Amazon’s alleged practices included concealing the pricing changes and misleading advertisers who questioned the auction system, the complaint said.

The case marks a significant challenge to Amazon’s advertising business, with the FTC seeking to address what it describes as deceptive and unfair practices.