FTC and 22 States Accuse Amazon of Secretly Inflating Ad Auction Prices

FTC and 22 States Accuse Amazon of Secretly Inflating Ad Auction Prices
Regulators say Amazon turned an ostensibly competitive ad marketplace into a hidden profit machine; Amazon says the lawsuit misunderstands a pricing system designed to reflect ad value and improve results for advertisers.

The Federal Trade Commission and a bipartisan coalition of 22 states filed suit in federal court in Washington, accusing Amazon of overcharging roughly 1.2 million advertising customers by more than $20 billion since 2019. The complaint alleges advertisers were led to believe they paid only slightly above the next-highest bid, while Amazon instead substituted higher prices of its own making. California Attorney General Rob Bonta said the company had “rigged billions of ad auctions,” hurting businesses that rely on Amazon to reach customers.

The alleged mechanism was a so-called “soft reserve price,” introduced after Amazon had long described its system as a second-price auction. According to the FTC, the reserve acted as an undisclosed surcharge: an internal Amazon figure standing in for the second bidder and lifting the price paid for an ad placement. Regulators say Amazon kept the practice secret, including from some sales and marketing staff, and designed experiments that showed advertisers would not detect the extra charges. “We don’t tell them about the surcharge, we let them assume [it is] GSP-based,” one employee wrote in a 2024 message cited in the complaint.

Amazon does not dispute that it uses reserve prices, but sharply rejects the allegation of deception. It says a soft reserve is a real-time estimate of an ad slot’s market value, while a hard reserve helps ensure bids cover costs. Crucially, Amazon says, advertisers never pay more than their maximum bid.

The company calls the case “misguided” and says the FTC relied on “a handful of simplified communications” after reviewing about 1.5 million pages of records. Amazon also argues there was no consumer harm: inflation-adjusted average cost-per-click remained flat from 2019 through 2024, it says, while relevance-based auctions saved advertisers billions. The FTC counters that the proper comparison is not whether prices rose overall, but whether advertisers paid more than the auction method Amazon promised would require.

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