The FTC and 22 states sue Amazon over a hidden ad-auction surcharge

The auction told advertisers they would pay the second-highest bid. According to the FTC, a hidden bidder made sure they paid their own.

The complaint

On August 31, 2026 the Federal Trade Commission and 22 state attorneys general sued Amazon in the U.S. District Court for the Western District of Washington. The complaint alleges that since 2019 Amazon has applied a hidden “soft reserve price,” referred to internally as “proxy 2nd price,” to its advertising auctions. In a second-price auction the winner pays the runner-up’s bid; the reserve price, the FTC says, functioned as a shill bid that converted the auctions into first-price ones in practice. By 2024, advertisers were paying their full bid about 80% of the time.

The products named are Sponsored Products, Sponsored Brands and Display ads. The FTC counts over 1 million affected brands and sellers, more than 500,000 of them small and medium-sized businesses, and puts the money extracted over seven years in the tens of billions of dollars.

Amazon’s customers were also its sellers

The FTC chairman’s summary: “Amazon has millions of advertising customers who were misled into paying significantly higher prices.” The detail that gives the case its shape is who those customers are. Most Amazon advertisers are the same third-party sellers whose products the ads promote, so a surcharge on ads is a surcharge on selling through Amazon at all.

What comes next

The case joins the FTC’s broader antitrust action against Amazon and will turn on internal documents about how the reserve price was set and disclosed. Amazon has not yet responded in court. Whatever the outcome, the mechanics of platform ad auctions, long treated as a black box, are now a matter of public record.