FTC sues Amazon over alleged secret ad auction surcharge

The US Federal Trade Commission and 22 state attorneys general have sued Amazon, alleging it quietly inflated the price of its search advertising auctions for more than seven years.

The complaint was filed on 31 August in the US District Court for the Western District of Washington, after a 2-0 Commission vote. It alleges Amazon described its Sponsored Products auction as a second-price auction, in which the winner pays a penny more than the next highest bid, while from 2019 applying an undisclosed charge known internally as a “soft reserve price”. The practical effect, the FTC says, was that advertisers increasingly paid their full bid: from 30% to 40% of the time in 2021, to around 80% by 2024.

The regulator puts the reach at more than a million brands and sellers, including over 500,000 small and medium businesses, and the sum extracted at tens of billions of dollars. FTC chairman Andrew Ferguson said Amazon’s advertising customers “were misled into paying significantly higher prices”.

None of this is established fact. These are untested allegations in a civil complaint, and Amazon is contesting all of them. In its published response, the company calls the case misguided, says “in no scenario does an advertiser pay more than their bid”, and states that average winning bids on Sponsored Products search ads fell by half between 2019 and 2025, with roughly 92% of placed ads not going to the highest bidder.

A verdict is years away, so the useful takeaway for advertisers is not who wins. It is that auction mechanics are a black box you are asked to accept on trust, and that the description of how a price is set can change without the buyer noticing. If you spend in retail media, the question for your rep is a plain one: what determines the price I actually pay, and how would I find out if that changed?