FTC and 22 states accuse Amazon of secretly inflating ad prices in auctions (August 31, 2026)
The Federal Trade Commission and 22 state attorneys general filed suit against Amazon on August 31, 2026, alleging the company systematically inflated search advertising prices in auctions over seven years, costing more than 1 million sellers and consumers tens of billions of dollars. Amazon disputes the allegations, saying advertisers adjust bids based on performance, not auction mechanics.
The Federal Trade Commission and attorneys general from 22 states sued Amazon on August 31, 2026, alleging the company systematically hid surcharges on search advertising prices over a seven-year period, costing more than 1 million sellers tens of billions of dollars.
The lawsuit centers on how Amazon's search ad auctions work. According to the complaint, Amazon told advertisers they would pay only one cent more than the second-place bidder in a second-price auction format. Internal documents cited in the lawsuit suggest Amazon charged the winning bidders their own bid price about 80% of the time instead, and internal communications indicate employees discussed raising prices while hoping advertisers would not notice and reduce their spending.
The 22 states joining the FTC 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. FTC Chairman Andrew N. Ferguson stated in a written comment that when Amazon, as one of the world's largest online retailers, engages in such conduct, the impact reaches millions of advertising customers and those costs are passed to consumers.
According to North Carolina Attorney General Jeff Jackson, Amazon tested how much it could increase hidden charges without being detected by advertisers. The lawsuit alleges Amazon took steps to actively conceal the inflated prices and that as confidence in advertiser unawareness grew, hidden surcharges substantially increased. Prosecutors are seeking a court order to bar the company from continuing the practice and to require penalties, restitution and other damages.
Amazon rejected the allegations, calling the lawsuit misguided. The company said average winning bids for sponsored product ads dropped 50% from 2019 to 2025 and that the FTC's claims fundamentally misunderstand how advertisers operate. According to Amazon, advertisers adjust bids based on real-world performance, not descriptions of auction mechanics. The company also estimated that advertisers saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone.
The FTC and 22 states allege Amazon secretly applied surcharges to over 1 million sellers in search ad auctions for seven years, telling them they would pay only one cent more than the second-place bidder but allegedly charging the winners their own bid price about 80% of the time.
The case will turn on whether courts find Amazon's auction disclosures misleading enough to violate antitrust and consumer protection law, and whether the alleged 80% deviation from stated second-price mechanics caused measurable harm. Discovery in the case may reveal whether Amazon's internal testing documents establish knowledge of deception or whether the company's performance data supports its defense.
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