The Federal Trade Commission and 22 state attorneys general have sued Amazon, alleging the e-commerce company secretly inflated the price of its search advertising auctions for over seven years, according to a press release from the consumer protection agency. Amazon executives played an active role in concealing this behavior, the complaint states, while the company believed that its disclosure could cause “irrevocable damage to advertiser trust,” per internal documents quoted in the release.
Search advertising, including Sponsored Product Ads, still make up the lion’s share of Amazon’s ads business, which neared $70 billion in revenue in 2025 and constitutes the third-largest digital ad platform behind Google and Meta. A federal case focused on Amazon advertising comes amid renewed calls to bring greater standardization and transparency to retail media, a category where Amazon dominates ad spending, controlling around three-quarters of the total U.S. market, analyst estimates suggest. The FTC claims Amazon’s practices affected over 1 million brands while delivering tens of billions in revenue to its own business.
“The allegations raise uncomfortable questions about how transparent Amazon is with advertisers, and whether they were paying more than they realized,” Emarketer principal analyst Zak Stambor said in emailed comments.
Hidden charges
As outlined in the complaint, Amazon offered advertisers a first-price auction, where they pay the amount of their winning bid, and a second-price auction, where winners pay one cent more than the next highest bidder for each successful bid on a keyword. Due to the nature of second-price auctions, also known as GSPs, advertisers often bid higher, recognizing they will “only be liable to pay the least bid amount needed to win under the auction’s rules,” the FTC said.
Amazon in 2019 altered its rules to include what one internal document cited by the complaint called a “hidden” surcharge within GSPs. This surcharge, also referred to internally at Amazon as a “soft reserve price,” led advertisers to pay “substantially” more than what the price determined by the GSP auction would suggest.
Prices would be inflated during normal shopping windows and Amazon would apply “far greater increases” to prices for high-volume shopping occasions, including Amazon Prime Day and Black Friday. Amazon allegedly was aware of the backlash this approach could spur, hence keeping it secret, and would steadily ramp up prices in the lead up to events like Prime Day to mask the extent of the hike, the FTC said.
“When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” FTC Chairman Andrew N. Ferguson said in a statement. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers.”
Amazon’s response
When asked for comment on the suit, Amazon pointed to a lengthy blog post responding to the complaint, rejecting the FTC’s claims that it caused either consumer or advertiser harm. Amazon argues the cost per click for Sponsored Product Ads, a focus of the case, were flat when adjusted for inflation between 2019 and 2024 while conversion rates, a closely watched performance metric, rose 24%.
“The FTC’s claim fundamentally misunderstands how advertisers operate. Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics,” Amazon wrote in the blog post.
Amazon said that specific practices under scrutiny, including soft reserve prices, are common in the industry and that the FTC cherry-picked materials from outdated or simplified documents. It also pushed back against the idea of widespread internal effort to knowingly deceive advertisers.
“With a writing culture like we have, people at times use email as a brainstorming and suggestive medium, expressing ideas, testing hypotheses, but sometimes expressing thoughts that are either ill-formed or that they change later with the benefit of conversation and other views,” the blog post said. “A stray email is not indicative of a team's intent or even collective viewpoint.”
This is the third FTC case against Amazon in recent years following suits focused on its Prime subscription, which Amazon settled, and a monopoly over online retail that is set to go to trial next year. Cases of this nature can take a long time to play out and the response from advertisers may be muted given Amazon’s dominant place in the ecosystem.
“[A]dvertisers face a tough challenge because Amazon is incredibly hard to walk away from,” said Emarketer’s Stambor. “We expect Amazon to generate $927.82 billion in worldwide retail ecommerce sales this year, thanks in large part to its Prime membership program, which gives it an ironclad grip on shoppers. That combination makes Amazon’s ads particularly powerful and gives advertisers few easy alternatives, even as scrutiny of the platform grows."
