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The Federal Trade Commission (FTC) and 22 states sued Amazon on August 31. They accuse the company of raising ad costs through hidden charges.

The case focuses on Amazon’s online advertising auctions. These auctions help brands buy ads that appear in Amazon search results and other locations.

According to the FTC, more than 1 million brands and sellers used the affected ad system. The agency says more than 500,000 were small and midsize businesses.

The FTC also says Amazon’s alleged practices may have generated tens of billions of dollars in extra revenue.

Amazon denies the claims. The company calls the lawsuit misguided and says the FTC does not understand how its ad system works.

Key Takeaways

• The FTC and 22 states sued Amazon over its ad auction system.
• The FTC alleges Amazon added hidden charges to some ad auctions.
• The agency says the practice began in 2019.
• More than 1 million brands and sellers may have been affected.
• More than 500,000 affected advertisers were small and midsize businesses.
• The FTC says the alleged conduct may have cost advertisers tens of billions of dollars.
• Amazon denies wrongdoing and disputes the FTC’s claims.
• The case could affect digital advertising and technology law.

FTC Sues Amazon Over Ad Auctions

The lawsuit centers on how Amazon sets prices for online ads.

Advertisers bid for ad space on Amazon. These ads can appear when shoppers search for products.

The FTC says Amazon told advertisers that it used a second-price auction.

In this type of auction, the winner does not always pay the full amount of the winning bid. Instead, the price can depend on the next-highest bid.

However, the FTC says Amazon changed this system.

FTC Alleges Amazon Used Hidden Ad Charges

The FTC says Amazon added an undisclosed charge in 2019.

The agency says Amazon called this charge a “soft reserve price” in its internal records.

According to the complaint, the charge could make advertisers pay more than they expected.

The FTC also says Amazon kept describing its ad system as a second-price auction.

As a result, advertisers may have based their bids on a pricing system that did not work as they understood it.

The agency also points to Amazon’s website and sales materials. It says those materials helped create the impression that advertisers would pay only what was needed to win an auction.

How Amazon’s Ad Auction Works

Amazon’s ad system allows businesses to compete for advertising space.

For example, one advertiser might bid $5 for an ad. Another might bid $3.

In a typical second-price auction, the winning advertiser could pay an amount linked to the lower bid. The advertiser would not simply pay the full $5.

This difference can affect how businesses set their bids.

Therefore, the FTC argues that clear pricing rules matter. Advertisers need to know how much they could pay before entering an auction.

FTC Says Amazon Changed Its Pricing

The FTC says Amazon’s system changed over time.

According to the complaint, advertisers paid their full winning bids more often after the alleged change.

For Sponsored Products ads, the FTC says the share rose from about 30% to 40% in 2021. It then reached about 70% in 2022.

By 2024, the figure was about 80%, according to the agency.

The FTC argues that this made Amazon’s system operate more like a first-price auction.

The agency also claims Amazon did not clearly tell advertisers about the change.

More Than 1 Million Advertisers Affected

The size of the alleged impact is a major part of the case.

The FTC says more than 1 million brands and sellers used the affected advertising system.

More than 500,000 of those businesses were small and midsize companies, according to the agency.

The FTC also claims the alleged conduct caused major financial harm.

The agency says the practices may have taken tens of billions of dollars from advertisers.

The FTC alleges that advertisers lost more than $20 billion because of the practices.

However, these figures are allegations. The court has not ruled that Amazon caused this amount of harm.

22 States Join the Amazon Lawsuit

The FTC is not bringing the case alone.

Attorneys general from 22 states joined the lawsuit against Amazon.

The group includes California, New York, Florida, Washington, New Jersey, Pennsylvania, Illinois and Colorado.

Other states in the case include Alaska, Arizona, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, North Carolina, Oklahoma, Rhode Island, South Carolina and Vermont.

The case was filed in the U.S. District Court for the Western District of Washington.

FTC Seeks Money and Other Remedies

The FTC wants the court to stop the practices described in its complaint.

The agency is also seeking monetary relief and other remedies.

However, Amazon has not been found liable.

The company will have a chance to challenge the claims in court. The states will also need to prove their claims as the case moves forward.

Amazon Rejects the FTC’s Claims

Amazon strongly disputes the allegations.

The company says the FTC has misunderstood its advertising system. Amazon also argues that the agency has relied on simple explanations that do not show how its system actually works.

Meanwhile, Amazon points to its own advertising data.

The company says average cost per click for Sponsored Products stayed flat from 2019 through 2024 after adjusting for inflation.

Amazon also says average winning bids for Sponsored Products search ads fell 50% from 2019 to 2025.

Furthermore, Amazon says advertisers saved more than $8 billion from 2021 through 2025 under its advertising approach.

The company also rejects the claim that its ad practices caused higher prices for consumers.

Amazon’s Ad Business Grows

The lawsuit comes as Amazon’s advertising business continues to expand.

Amazon’s advertising business generated $68.6 billion in revenue in 2025, underscoring the growing importance of advertising to the company’s overall business.

Amazon’s ad sales also rose 26% in the second quarter of 2026. The company reported $19.8 billion in advertising revenue for that quarter.

That growth makes the lawsuit important for the digital advertising market.

Amazon gives brands access to shoppers who are already looking for products. As a result, its advertising platform has become an important sales channel for many businesses.

Any major change to Amazon’s ad system could therefore affect advertisers and marketing companies.

Why the Amazon FTC Case Matters

The case could become important for lawyers who work in technology and advertising law.

It could also matter to attorneys who advise online marketplaces and large technology companies.

Digital Advertising Law

The lawsuit raises questions about pricing transparency.

Advertisers need to understand how platforms calculate ad prices. Therefore, companies may face greater pressure to explain complex auction systems in clear terms.

Lawyers may also review how companies describe automated pricing systems to their business customers.

Consumer Protection Law

The FTC says Amazon misled advertisers about its auction system.

That claim raises a larger legal question.

Can a company face liability if customers make business decisions based on an allegedly inaccurate explanation of an automated pricing system?

The Amazon case could provide useful guidance on that issue.

Technology Regulation

The case also shows how regulators are examining major technology companies.

Today, many platforms use automated systems to set prices and rank products or ads.

As a result, lawyers may need to look closely at both company policies and the technology behind them.

What’s Next for Amazon?

The lawsuit remains in its early stages.

Amazon will have the opportunity to respond to the complaint. The company can also challenge the FTC’s claims in court.

Next, the case could move into discovery. During that process, lawyers may seek documents and other evidence about Amazon’s ad system.

That evidence could include internal pricing records, employee communications and information about how Amazon explained its auctions to advertisers.

The case could eventually go to trial. However, the parties could also reach a settlement.

Any financial payment or change to Amazon’s advertising system would depend on future court action.

Amazon Faces More Legal Pressure

The new lawsuit adds to Amazon’s legal challenges.

The FTC has also taken action against Amazon over its Prime enrollment practices and other business practices.

In 2025, Amazon agreed to pay $2.5 billion to resolve FTC allegations related to Prime enrollment.

The advertising case is different. It focuses on Amazon’s relationship with advertising customers and its online ad auctions.

Still, both cases show the growing legal attention on Amazon’s business practices.

Regulators are examining how the company uses its size, technology and market position.

Frequently Asked Questions

Why did the FTC sue Amazon?

The FTC alleges Amazon used hidden charges in its ad auctions. The agency says Amazon continued to describe its system as a second-price auction.

How many states joined the Amazon lawsuit?

Twenty-two states joined the FTC’s lawsuit against Amazon. The group includes states such as California, New York, Florida and Washington.

How many advertisers were affected?

The FTC says more than 1 million brands and sellers used the affected system. More than 500,000 were small and midsize businesses.

What is a second-price ad auction?

A second-price auction usually means the winning advertiser does not simply pay its full bid. Instead, the final price can depend on other bids in the auction.

What does Amazon say about the lawsuit?

Amazon denies the allegations. The company says the FTC has misunderstood its advertising system and its pricing process.

How much money does the FTC say was involved?

The FTC says the alleged practices may have generated tens of billions of dollars from advertisers. The agency’s complaint alleges more than $20 billion in harm.

Has Amazon been found liable?

No. The allegations have not been proven in court. Amazon will have an opportunity to defend itself as the lawsuit proceeds.

What could happen to Amazon?

The FTC is seeking monetary relief and other remedies. The case could lead to further court proceedings, a settlement or a trial.

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