The Federal Trade Commission (FTC), in collaboration with attorneys general from 22 states, has initiated legal proceedings against Amazon, alleging that the company engaged in deceptive practices by secretly inflating prices in its online advertising auctions. The complaint, filed on August 31, 2026, asserts that over a span of seven years, Amazon covertly increased the costs for more than one million brands and sellers advertising on its platform, potentially extracting tens of billions of dollars from these advertisers.
Central to the lawsuit are Amazon’s advertising formats, including Sponsored Products, Sponsored Brands, and Display Ads. Advertisers bid for prominent placement of their ads alongside search results on Amazon’s platform. The FTC alleges that Amazon misrepresented its auction process, claiming to operate “second-price” auctions where the highest bidder pays only one cent more than the second-highest bid. However, the complaint contends that, starting in 2019, Amazon introduced undisclosed surcharges, referred to internally as “soft reserve prices,” effectively converting these auctions into “first-price” auctions where advertisers pay their full bid amount. This change reportedly led to advertisers paying their own bid amount approximately 80% of the time by 2024, a significant increase from 30-40% in 2021. ([ftc.gov](https://www.ftc.gov/news-events/news/press-releases/2026/08/ftc-states-sue-amazon-over-secret-ad-surcharge-scheme?utm_source=openai))
Internal Amazon documents cited in the complaint suggest that company executives were aware of the misleading nature of these practices. Notes from a 2024 discussion among senior executives, including the head of Amazon Ads and Amazon’s Chief Digital Economist, acknowledged that Amazon’s “clever non-transparent way to charge first price” had been an “incredibly effective way to drive revenue.” ([ftc.gov](https://www.ftc.gov/news-events/news/press-releases/2026/08/ftc-states-sue-amazon-over-secret-ad-surcharge-scheme?utm_source=openai))
FTC Chairman Andrew N. Ferguson emphasized the broader implications of Amazon’s alleged conduct, stating, “When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering. Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers.” ([ftc.gov](https://www.ftc.gov/news-events/news/press-releases/2026/08/ftc-states-sue-amazon-over-secret-ad-surcharge-scheme?utm_source=openai))
In response, Amazon has dismissed the lawsuit as “misguided,” arguing that the FTC’s claims fundamentally misunderstand how advertisers operate. The company maintains that its auction processes are standard industry practice and that advertisers are properly informed about the pricing system. ([techcrunch.com](https://techcrunch.com/2026/08/31/ftc-accuses-amazon-of-running-a-secret-ad-surcharge-scheme-in-new-lawsuit/?utm_source=openai))
The lawsuit seeks to halt the alleged deceptive practices and obtain financial restitution for affected advertisers. If no settlement is reached, the case may proceed to trial, potentially leading to significant changes in how Amazon conducts its advertising auctions and impacting the broader digital advertising industry.