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Amazon faces FTC lawsuit over alleged $20 billion ad-rigging scheme
Sep 04, 2026
đź“Ť Phliadelphia,PA, USA
# FTC, States Accuse Amazon of Secretly Inflating Advertising Prices
The Federal Trade Commission and 22 state attorneys general have sued Amazon, alleging the company secretly manipulated its advertising auctions and overcharged businesses by tens of billions of dollars over more than seven years.
North Carolina Attorney General Jeff Jackson described the case as an alleged “ad-rigging scheme,” claiming Amazon quietly added small amounts to millions of advertising transactions while making advertisers believe they were participating in a second-price auction.
Amazon’s Sponsored Product advertising system is at the heart of the lawsuit. Under a traditional second-price auction, the winning advertiser generally pays an amount based on the next-highest bid. For example, if one company bids $1 and another bids 50 cents, the winner might pay about 51 cents rather than the full $1.
The lawsuit alleges that Amazon secretly deviated from that model.
According to the FTC complaint, Amazon introduced an undisclosed “soft reserve price” in 2019 that could increase what advertisers ultimately paid for winning placements.
The agency alleges that Amazon used an artificial or “invented” auction participant to raise prices beyond what a genuine second-price auction would have produced.
The FTC says the practice affected more than 500,000 small and medium-sized businesses that purchased advertising through Amazon’s website and mobile application.
The broader complaint alleges that more than one million brands and sellers were affected by the pricing system and that Amazon potentially generated tens of billions of dollars in additional advertising revenue.
The alleged pricing changes covered advertising products including Sponsored Products, Sponsored Brands and Display Ads, which businesses use to place promotions alongside Amazon search results and product pages.
The FTC claims Amazon gradually increased the amount advertisers paid while monitoring whether businesses noticed or changed their bidding behavior.
According to the complaint, advertisers paid their full winning bids approximately 30% to 40% of the time in 2021. That figure allegedly increased to about 70% in 2022 and roughly 80% in 2024.
Regulators argue that the distinction between first-price and second-price auctions is important because businesses make bidding decisions based on how they expect the system to work.
The complaint alleges that Amazon knew revealing the changes could encourage advertisers to reduce their bids and potentially cut the company's advertising revenue.
The FTC also claims that Amazon adjusted the alleged surcharges during periods of particularly strong advertising demand, including Prime Day and Black Friday.
Federal regulators say the alleged conduct could ultimately affect consumers because businesses may pass higher advertising costs on through increased product prices.
FTC Chairman Andrew N. Ferguson said the agency was concerned about the scale of the alleged conduct and argued that millions of advertising customers were potentially affected.
The lawsuit was filed in the U.S. District Court for the Western District of Washington after the FTC authorized the action in a 2-0 vote.
North Carolina joined the multistate case, with Jackson emphasizing competition, affordability and transparency in digital advertising.
The allegations have placed renewed attention on the growing power of Amazon's advertising business, which has become an important source of revenue alongside the company's retail and cloud operations.
The case will now move through federal court, where Amazon will have an opportunity to respond to the allegations.
At its core, the lawsuit raises a broader question about transparency in digital marketplaces: whether companies operating complex automated auctions can quietly change the rules governing prices while customers continue to believe the system works differently.
If regulators ultimately prevail, the case could have significant implications for how major technology platforms design, disclose and operate automated advertising auctions.
The Federal Trade Commission and 22 state attorneys general have sued Amazon, alleging the company secretly manipulated its advertising auctions and overcharged businesses by tens of billions of dollars over more than seven years.
North Carolina Attorney General Jeff Jackson described the case as an alleged “ad-rigging scheme,” claiming Amazon quietly added small amounts to millions of advertising transactions while making advertisers believe they were participating in a second-price auction.
Amazon’s Sponsored Product advertising system is at the heart of the lawsuit. Under a traditional second-price auction, the winning advertiser generally pays an amount based on the next-highest bid. For example, if one company bids $1 and another bids 50 cents, the winner might pay about 51 cents rather than the full $1.
The lawsuit alleges that Amazon secretly deviated from that model.
According to the FTC complaint, Amazon introduced an undisclosed “soft reserve price” in 2019 that could increase what advertisers ultimately paid for winning placements.
The agency alleges that Amazon used an artificial or “invented” auction participant to raise prices beyond what a genuine second-price auction would have produced.
The FTC says the practice affected more than 500,000 small and medium-sized businesses that purchased advertising through Amazon’s website and mobile application.
The broader complaint alleges that more than one million brands and sellers were affected by the pricing system and that Amazon potentially generated tens of billions of dollars in additional advertising revenue.
The alleged pricing changes covered advertising products including Sponsored Products, Sponsored Brands and Display Ads, which businesses use to place promotions alongside Amazon search results and product pages.
The FTC claims Amazon gradually increased the amount advertisers paid while monitoring whether businesses noticed or changed their bidding behavior.
According to the complaint, advertisers paid their full winning bids approximately 30% to 40% of the time in 2021. That figure allegedly increased to about 70% in 2022 and roughly 80% in 2024.
Regulators argue that the distinction between first-price and second-price auctions is important because businesses make bidding decisions based on how they expect the system to work.
The complaint alleges that Amazon knew revealing the changes could encourage advertisers to reduce their bids and potentially cut the company's advertising revenue.
The FTC also claims that Amazon adjusted the alleged surcharges during periods of particularly strong advertising demand, including Prime Day and Black Friday.
Federal regulators say the alleged conduct could ultimately affect consumers because businesses may pass higher advertising costs on through increased product prices.
FTC Chairman Andrew N. Ferguson said the agency was concerned about the scale of the alleged conduct and argued that millions of advertising customers were potentially affected.
The lawsuit was filed in the U.S. District Court for the Western District of Washington after the FTC authorized the action in a 2-0 vote.
North Carolina joined the multistate case, with Jackson emphasizing competition, affordability and transparency in digital advertising.
The allegations have placed renewed attention on the growing power of Amazon's advertising business, which has become an important source of revenue alongside the company's retail and cloud operations.
The case will now move through federal court, where Amazon will have an opportunity to respond to the allegations.
At its core, the lawsuit raises a broader question about transparency in digital marketplaces: whether companies operating complex automated auctions can quietly change the rules governing prices while customers continue to believe the system works differently.
If regulators ultimately prevail, the case could have significant implications for how major technology platforms design, disclose and operate automated advertising auctions.
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