The Federal Trade Commission (FTC) filed a lawsuit against Amazon on Monday, August 31, 2026, in U.S. District Court for the Western District of Washington, accusing the e-commerce giant of secretly overcharging advertisers through manipulated pricing and auction systems since 2019 [1, 2, 3]. Twenty-two states, including California, New York, Florida, and Washington, joined the FTC in the suit [2, 4, 5].
The complaint alleges Amazon artificially inflated auction prices by inserting fake bids—called a "hidden surcharge" or "soft reserve price"—that pushed advertisers to pay amounts close to their own original bids. This manipulated the advertised "second-price" auction system into effectively a first-price auction about 80% of the time, increasing advertiser costs without their knowledge [2, 6, 3, 7].
The alleged overcharging has generated more than $20 billion in extra revenue for Amazon from advertisers over the seven years the practice has been ongoing, according to the FTC and state attorneys general. The lawsuit focuses on Amazon's Sponsored Products, Sponsored Brands, and Display ads that appear alongside user search results [1, 2, 6, 3, 4, 5, 7].
Amazon reported more than $68 billion in advertising revenue in 2025, highlighting the size of its ad business targeted by the complaint [2]. FTC Chairman Andrew Ferguson said the "higher advertising prices were largely passed on to American consumers," linking the ad overcharges to increased prices on Amazon's marketplace [6].
Amazon disputes the allegations, calling the lawsuit "misguided" and stating it "fundamentally misunderstands how advertisers behave" [6]. In a company statement, Amazon said the FTC’s case relies on "a handful of simplified communications to allege a companywide effort to deceive" and described that claim as "patently false" [7]. The company also said that from 2019 to 2024, its average cost per click remained flat while sales generated by ads increased and that average winning bids for Sponsored Products search ads fell by 50% [6, 3].
Internal Amazon documents described in the complaint reveal that "the second price isn’t set by an actual bidder, but rather by Amazon in the form of a 'proxy 2nd price that we calculate,'" which formed the basis for the alleged hidden surcharges [6]. The FTC claims Amazon has been able to "successfully impose hidden surcharges on advertisers almost every time a shopper clicks on an advertisement on the Amazon website" [7].
The 22 states involved in the lawsuit include Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont, and Washington [2, 4, 5].
The lawsuit is the latest legal challenge to Amazon’s dominant online advertising business. The court will now review the complaint and the evidence presented by the FTC and the states.
