FTC and 22 states sue Amazon over secret ad surcharge

The Federal Trade Commission and 22 states sued Amazon on Monday, alleging a secret advertising surcharge scheme that they say overcharged about 1.2 million advertising customers and likely extracted more than $20 billion since 2019, in a complaint and press release the agency published the same day.

Read the instrument correctly before the number: this is a civil complaint seeking a permanent injunction and monetary relief, not a fine already imposed, not a settlement, and not a judgment.

Every figure in it is an allegation a court has yet to test, and Amazon calls the suit misguided and disputes the core claim.

The instrument is a complaint, not a fine

The case is Amazon.com, Inc. as defendant, No. 2:26-cv-03097, filed August 31, 2026 in the U.S. District Court for the Western District of Washington, with the Commission authorizing the filing on a 2 to 0 vote. The 22 states joining are 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.

The complaint's paragraph 1 puts the alleged take at more than $20 billion, while the press release says tens of billions; both are allegations of money extracted, not an award anyone has ordered Amazon to pay.

On relief, the FTC pleads a permanent injunction and other relief under Section 5(a) of the FTC Act, and the plaintiff states seek civil penalties, restitution, disgorgement or forfeitures, and costs under their own laws. That is the shape of what is being asked for, and it is different from the older FTC monopoly case against Amazon.

What Amazon allegedly did to the auction

The mechanism is the heart of it. Amazon marketed its ad auctions as a generalized second-price system, where a winner pays about one cent more than the next-ranked bid, across Sponsored Products, Sponsored Brands, and Sponsored Display.

The complaint alleges that after that competitive result was set, Amazon quietly added undisclosed soft reserve surcharges, and ran internal proxy second-price and invented-participant mechanics the complaint likens to shill bids. The effect the FTC alleges is that by 2024, Sponsored Products advertisers paid their own winning bid about 80% of the time, which is first-price behavior dressed as second-price.

The alleged victims are roughly 1.2 million U.S. advertising customers, including more than 500,000 small and medium businesses.

"Amazon has millions of advertising customers who were misled into paying significantly higher prices," FTC Chairman Andrew Ferguson said in the press release, adding that "these higher costs were largely passed on to American consumers."

Amazon's answer is a live dispute, not a footnote

Amazon does not concede the numbers and offers its own. The company says the average cost-per-click for Sponsored Products search ads was flat adjusted for inflation from 2019 to 2024, that average winning bids fell 50% from 2019 to 2025, and that roughly 92% of placed ads are not given to the highest bid. It estimates advertisers saved more than $8 billion from 2021 to 2025 because it ranks ads on relevancy rather than bid price alone, argues that soft and hard reserves are standard across the industry, and states that "in no scenario does an advertiser pay more than their bid."

It also rejects the framing, saying "the FTC wants the public to believe this case is about higher prices for consumers. It is not." None of that is adjudicated; it is Amazon's response, and it sits directly against the FTC's account of the same auctions.

Regulators pressing "unfair and deceptive" theories against large firms is the season, visible too in the OCC and FDIC unsafe-and-unsound rulemaking and in court fights over agency authority like Kalshi's, and none of those is settled by the filing alone.

The takeaway

If you spend on Amazon ads, do not wait on the docket. Pull your Sponsored Products data and compare your winning bids against what you actually paid, because the specific allegation is that the paid price detached from the second-price rule and drifted toward your own bid by 2024. Read your auction terms for any soft reserve or reserve-price language and whether it is disclosed, and if you operate a marketplace of your own, treat the gap between a marketed second-price auction and the price that clears as the exact exposure this complaint is built on.