SEATTLE, WA — The U.S. Federal Trade Commission (FTC), joined by a bipartisan coalition of 22 state attorneys general, has filed a landmark federal lawsuit against Amazon.com Inc., accusing the retail titan of executing a covert, multi-year scheme to inflate digital advertising prices.
The complaint, filed in the U.S. District Court for the Western District of Washington, alleges that Amazon systematically overcharged over 1.2 million merchants and brand partners—including more than 500,000 small and medium-sized businesses—extracting an estimated $20 billion in illicit ad surcharges since 2019.
Core Allegations and Auction Mechanics
The antitrust lawsuit targets Amazon’s core ad formats, including Sponsored Products, Sponsored Brands, and Sponsored Display.
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Misrepresented Auction Model: The FTC claims Amazon publicly represented its ad placement system as a competitive “second-price” auction—where the winning bidder pays only a cent above the second-highest bid.
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Undisclosed “Soft Reserve” Prices: The regulator alleges Amazon quietly introduced an unannounced “soft reserve” floor price around 2019. This effectively forced advertisers to pay up to their full bid amount rather than the market-driven price, with winning bidders paying their full max bid in roughly 80% of auctions by 2024, up from 30%–40% in 2021.
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Peak Shopping Surcharges: Regulators allege Amazon deliberately intensified these artificial price floors during high-volume sales events, such as Prime Day and Black Friday, driving up pay-per-click costs while keeping the mechanism hidden from seller dashboards.
Amazon Denies Claims and Defends Platform ROI
Amazon strongly refuted the lawsuit, dismissing the FTC’s legal theory as “fundamentally flawed” and asserting that regulators rely on cherry-picked internal documents.
“Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics… We estimate advertisers saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone,” the company stated, adding that inflation-adjusted cost-per-click prices stayed largely flat over the past five years.
Broader Regulatory Impact
As the world’s third-largest digital advertising platform behind Google and Meta, Amazon generated over $68 billion in ad revenue in 2025. The joint lawsuit by the FTC and states like California, New York, Florida, and Washington opens a major new regulatory front against the tech giant, which is already set to face a separate federal antitrust trial over its core e-commerce marketplace dominance.
