Amazon sued over alleged $20 billion advertising surcharge scheme
Amazon is being sued by the US Federal Trade Commission and 22 states over allegations that it secretly inflated the prices advertisers paid to promote products on its platform.
Regulators allege the e-commerce giant used hidden surcharges in its advertising auctions, potentially costing more than one million brands and sellers over $20 billion.
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Amazon denies wrongdoing.
The lawsuit, filed in federal court in Washington state, focuses on the auctions used to determine the price of sponsored product, brand and display adverts appearing alongside search results on Amazon.
According to the FTC, Amazon had told advertisers that it operated a “second-price” auction system, under which successful bidders would generally pay only slightly more than the next-highest bid.
However, regulators allege that Amazon changed its system in 2019 by introducing an undisclosed “soft reserve price”, effectively increasing the amount advertisers were charged.
The FTC claims that by 2024, advertisers for Sponsored Products were paying their full winning bid around 80% of the time.
The agency alleges Amazon deliberately concealed the changes because revealing them could have encouraged advertisers to lower their bids.
It says the system generated tens of billions of dollars in additional revenue, with more than 500,000 small and medium-sized businesses among those potentially affected.
Amazon has rejected the allegations, describing the lawsuit as “misguided” and arguing that regulators misunderstand how its advertising auctions work.
The company says advertising costs have fallen while returns for advertisers have increased, and claims changes to its auction systems saved advertisers around $8 billion between 2021 and 2025, rather than costing them more.
The FTC and participating states are seeking civil penalties, compensation and other remedies, with the dispute now set to be decided in court.