The Federal Trade Commission and 22 state attorneys general filed a lawsuit against Amazon on August 31, alleging the company has secretly and systematically overcharged approximately 1.2 million advertisers since 2019 by manipulating the auctions it uses to set ad prices. The complaint covers three products most brand sellers use every day: Sponsored Products, Sponsored Brands, and Sponsored Display. If the allegations hold up, this is the biggest structural question mark over Amazon advertising in years.
The FTC's complaint, filed in U.S. District Court in Seattle, is 181 pages. The short version: Amazon told advertisers it ran a "second-price" auction, meaning the winner pays one cent above the runner-up's bid. The agency alleges Amazon began secretly substituting its own "soft reserve" bids to replace the auction outcome with a higher price.
The complaint says this practice affected close to 80% of Sponsored Products auctions and likely extracted more than $20 billion from advertisers over seven years.
What the Complaint Says
The core allegation is a hidden surcharge. Advertisers were told their costs were determined by competitive bidding. The FTC says Amazon instead inserted a floor price after the fact, one calibrated to maximize Amazon's revenue rather than reflect actual auction dynamics. On high-traffic shopping days, the complaint claims ad costs spiked as much as 50% above what a clean second-price auction would have produced.
Amazon disputes the characterization. The company says its auction disclosures are accurate and that, in its own words, "in no scenario does an advertiser pay more than their bid." Amazon also argues that average cost-per-click remained flat when adjusted for inflation and that ad quality improved over the same period. That's the defense. The lawsuit is just beginning.
The coalition seeking relief includes California, Florida, New York, and 19 other states. The FTC is asking for a permanent injunction to stop the practice and is seeking "tens of billions" in damages. Civil penalties from the state actions could add to that total.
What This Means for Brand Sellers Right Now
Today, nothing changes. Amazon's ad platform keeps running, your campaigns keep running, and you don't need to do anything differently because of this filing. Lawsuits at this scale typically take years to resolve, and no court has found Amazon liable for anything yet. That said, a few things are worth thinking about.
First, if the FTC's allegations are accurate, sellers who have been running Sponsored Products, Sponsored Brands, or Sponsored Display since 2019 may have paid more than a transparent auction would have produced. There's no mechanism right now to recover that, but cases like this sometimes end in advertiser restitution. It's worth keeping an eye on.
Second, this filing adds a very large question mark to Amazon's ad pricing going forward. If Amazon is ultimately required to change how its auctions work, the implications for how your ad spend converts could shift in ways that are hard to predict in advance. Brands with strong organic listing fundamentals are better positioned to absorb those changes than brands that depend entirely on paid placement to drive visibility.
The Bigger Picture
This is the third major federal lawsuit against Amazon in recent years. The company settled a separate FTC case over Prime enrollment practices for $2.5 billion in 2025. That gives some sense of scale for what the outcome here could look like, though the circumstances are different and litigation rarely plays out the way the complaint implies it will.
For now, the practical advice is straightforward: run your campaigns, watch your metrics, and don't make dramatic budget changes in response to a lawsuit that's likely years from resolution. What you can do is make sure your listings, content, and brand presence are strong enough to hold their ground if ad economics on the platform shift. Our team at Parker-Lambert works with brand sellers on exactly that kind of long-term positioning.
If you want to talk through what this means for your ad strategy heading into Q4, schedule a call with us here and we can look at your account together.