WASHINGTON — The Federal Trade Commission and 22 state attorneys general have sued Amazon, alleging that the retailer secretly inflated prices in its digital advertising auctions and misled brands and sellers about how those auctions worked.
The complaint alleges Amazon covertly increased the prices paid by more than 1 million advertising customers over more than seven years, potentially generating tens of billions of dollars in additional revenue. More than 500,000 small and midsize businesses participated in the affected auctions, according to the FTC.
The case targets a key component of Amazon’s growing retail media business. The company’s advertising platform has become an important marketing channel for consumer brands seeking to reach shoppers near the point of purchase, particularly through sponsored placements in Amazon search results.
The FTC said advertisers bid for Sponsored Products, Sponsored Brands, and Display Ads alongside product search results on Amazon’s website and app. Amazon represented its system as a “second-price” auction, in which the winning advertiser would pay slightly more than the next-highest bidder.
The complaint alleges that Amazon changed those mechanics beginning in 2019 by introducing an undisclosed surcharge known internally as a “soft reserve price.” Regulators contend that the system caused advertisers to pay substantially more than the price that would otherwise have been set by a second-price auction.
“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” said FTC Chairman Andrew N. Ferguson. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers. The FTC under President Trump won’t allow this deception to continue.”
According to the complaint, Sponsored Products advertisers paid their full bid between 30% and 40% of the time in 2021. That share increased to 70% in 2022 and to approximately 80% in 2024, allegedly due to the surcharges. The FTC said Amazon concealed the changes because advertisers could have responded by lowering their bids.
The allegations come as retail media has become an increasingly significant part of the relationship between retailers and suppliers. Amazon has been a major force behind that shift, expanding advertising beyond sponsored search and using its shopper data and commerce ecosystem to compete for a larger share of brand marketing budgets. The lawsuit highlights pricing transparency at a time when advertisers are placing greater emphasis on understanding the cost, measurement and incremental returns generated by retail media spending.
The FTC also alleges that Amazon increased surcharges during high-volume shopping periods, such as Prime Day and Black Friday. Internal documents cited in the complaint allegedly described the pricing system as an “incredibly effective way to drive revenue.”
The lawsuit was filed in the U.S. District Court for the Western District of Washington. The FTC voted 2-0 to authorize the complaint.
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