FTC and 22 States Sue Amazon Over Ad Auction Pricing

The Federal Trade Commission and 22 US states have sued Amazon, alleging that the company used undisclosed reserve prices to increase what advertisers paid for Sponsored Ads. The complaint says the practices affected more than 1.2 million advertising customers and generated tens of billions of dollars for Amazon. Amazon denies misleading advertisers. The company says its auction design prioritizes relevant ads, never charges more than an advertiser’s maximum bid and has improved campaign performance. The allegations have not been proven in court.

Key Takeaways: The Amazon Ad Auction Lawsuit

• The FTC and 22 state attorneys general filed the case on August 31.
• Regulators allege Amazon added undisclosed “soft reserve” prices to its ad auctions beginning in 2019.
• The complaint covers Sponsored Products, Sponsored Brands and Sponsored Display placements.
• The FTC says more than 1.2 million advertisers were affected, including over 500,000 small and medium-sized businesses.
• Amazon rejects the allegation that advertisers were deceived or harmed.
• The case could increase scrutiny of pricing transparency across retail media, but no remedy or advertiser refund has been ordered.

FTC Alleges Hidden Surcharges Changed Auction Prices

The FTC’s official announcement says Amazon represented its advertising system as a generalized second-price auction. Under that model, the winning advertiser should generally pay only enough to beat the next-highest ranked bid rather than the full amount it offered.

According to the 181-page complaint, Amazon introduced a “soft reserve price” that could replace the price produced by advertiser competition with a higher amount calculated by Amazon. Regulators characterize that intervention as an undisclosed surcharge.

For Sponsored Products, the complaint alleges that advertisers paid their full bid approximately 80% of the time in 2024, compared with 30% to 40% in 2021. It claims Amazon increased reserve prices more sharply during periods such as Prime Day and Black Friday.

These remain allegations made by the FTC and participating states. The filing begins the litigation; it is not a judicial finding that Amazon violated the law or that the stated damages are correct.

Why the Auction Format Matters to Advertisers

Advertisers approach first-price and second-price auctions differently. In a first-price auction, the winner pays its own bid and may reduce that bid to avoid overpaying. In a second-price system, an advertiser can bid closer to the maximum value of the placement because the final charge should be determined by the next-ranked competitor.

The regulators’ case is therefore focused on disclosure as well as price. They argue that advertisers submitted bids based on one understanding of the auction while Amazon applied a different pricing mechanism.

The lawsuit seeks an injunction, monetary relief, and penalties available under state laws.

Amazon Says Reserve Prices Improved Ad Relevance

In its response to the lawsuit, Amazon says soft reserves estimate the value of individual placements while hard reserves set the minimum bid required to enter an auction. It argues that reserve prices are common in advertising and that no customer is charged more than the maximum bid it authorized.

Amazon says its system increasingly gives relevance more weight than bid size. It reports that average winning Sponsored Products search bids fell 50% between 2019 and 2024 and estimates that the approach saved advertisers more than $8 billion from 2021 to 2025. These company figures have not been tested by the court.

The company also says some older educational materials used simplified auction explanations but denies a coordinated effort to deceive customers. It says it has updated its help content to describe reserve pricing more explicitly.

Why This Matters for Affiliate and Performance Teams

Affiliate publishers are not generally involved in Sponsored Ads auctions unless they also operate as Amazon sellers or advertisers. The case still matters because retail media and affiliate activity increasingly influence the same commercial journey.

Amazon recently extended Sponsored Products into creator content, bringing paid placements closer to affiliate recommendations. That makes transparency around bidding, attribution, and acquisition costs relevant across both channels.

Higher advertising costs could affect product margins, promotional budgets, or partner economics, but the lawsuit does not prove that Amazon’s practices caused changes to affiliate commissions or consumer prices. Amazon specifically disputes the FTC’s claim that consumers were harmed.

Performance teams should treat the complaint as a transparency case rather than evidence that campaign data is invalid. Advertisers can continue assessing cost per click, conversion rate, attributed sales, and return on ad spend while the case proceeds.