The Federal Trade Commission and 22 state attorneys general sued Amazon on Monday, alleging the retailer secretly overcharged advertisers through changes to its advertising auctions.
According to the FTC, Amazon changed how it determined prices without adequately disclosing those changes to advertisers. The agency estimates the practice generated more than $20 billion in additional advertising costs.
Amazon disputes the allegations, arguing its auction changes improved ad performance and ultimately saved advertisers money.
At the center of the case is a pricing mechanism Amazon introduced in 2019 called a “soft reserve price” and how Amazon explained it to advertisers.
What The FTC Is Alleging
Amazon had long described its advertising auctions as a form of second-price auction, which isn’t unique to Amazon.
Digital advertising platforms have widely used second-price auctions, and Google Search follows a similar general principle. An advertiser sets a maximum bid but often pays less based on the competition and other auction factors.
Under Amazon’s traditional model, advertisers would similarly submit the maximum amount they’re willing to pay for a click, but the winning advertiser generally paid only enough to beat the next-highest ranked competitor.
The FTC alleges Amazon changed how it calculated that price beginning in 2019.
Amazon introduced what it calls a “soft reserve price,” which sets a minimum value for an individual ad placement. According to the FTC, that reserve could increase the amount a winning advertiser paid even when another advertiser’s bid did not require a higher price.
The complaint alleges Amazon internally referred to the mechanism as an “invented auction participant” and used a “proxy 2nd price” to help determine the winning advertiser’s cost.
Why advertisers understood the auction to work a certain way is central to the FTC’s case.
If advertisers expect their maximum bid to serve primarily as a ceiling, with competition usually determining a lower final CPC, that can influence how aggressively they bid.
The FTC argues Amazon continued giving advertisers that impression even as more winning advertisers began paying their full bid.
According to the complaint, Sponsored Products advertisers paid their full bid about 30% to 40% of the time in 2021. That increased to 70% in 2022 and roughly 80% by 2024.
The FTC estimates the changes resulted in more than $20 billion in additional advertising costs.
Amazon does not dispute that soft reserve prices are part of its auctions. It disputes the FTC’s characterization of how they work and whether the practice harmed advertisers.
Amazon Says Advertisers Weren’t Overcharged
Amazon disputes both the FTC’s description of its auctions and its claim that advertisers were harmed.
In its response, Amazon says the FTC “fundamentally misunderstands how advertisers operate.”
Amazon acknowledges using soft reserve prices but says they help determine the market value of individual ad placements. It also argues reserve prices are common within digital advertising auctions.
Amazon says its auctions consider both an advertiser’s bid and predicted relevance. If a winning bid exceeds both the hard and soft reserve prices, the advertiser pays the soft reserve. If the bid clears the hard reserve but falls below the soft reserve, the advertiser pays its bid.
In either case, Amazon says an advertiser never pays more than its maximum bid.
Amazon also points to its own performance data as evidence that advertisers weren’t harmed. It says average winning bids for Sponsored Products search ads fell 50% between 2019 and 2025. Average CPC remained flat from 2019 through 2024 after adjusting for inflation, while conversion rates increased 24% between 2021 and 2025.
Amazon estimates its relevance-based auction model saved advertisers more than $8 billion between 2021 and 2025.
That doesn’t directly answer the FTC’s argument, though.
The FTC isn’t alleging advertisers paid more than their maximum bids. It’s arguing advertisers may have set those maximum bids differently if they understood how Amazon was determining the final price.
Amazon’s position is that advertisers don’t manage bids based on simplified descriptions of auction mechanics. They adjust based on actual CPCs, conversions and return on ad spend.
Whether Amazon adequately explained its auction mechanics is a central part of the dispute.
Other Ad Platforms Have Faced Similar Scrutiny
Amazon isn’t the only major advertising platform to face questions about what it tells advertisers about pricing and ad performance.
In 2025, the FTC began investigating both Amazon and Google over their search advertising practices. The investigation looked at whether the platforms adequately disclosed pricing and other terms, including whether they increased ad costs without properly informing advertisers.
So far, the FTC has not filed a comparable lawsuit against Google.
Google has faced other legal challenges involving its ad auctions. In 2020, a Texas-led group of states sued Google over its display advertising business, alleging anticompetitive practices and deceptive representations about how its ad auctions operated.
The Department of Justice brought a separate ad tech antitrust case in 2023. A federal judge ruled in 2025 that Google illegally monopolized two markets involving publisher ad servers and ad exchanges. That case focused on competition within Google’s open-web ad tech business rather than allegations that Google misled Google Ads customers about CPC pricing.
Meta has faced a different type of advertiser lawsuit.
Advertisers sued Meta over its “Potential Reach” metric, alleging Meta represented it as an estimate of people when the metric actually counted accounts. The advertisers argue those inflated estimates led them to buy more ads and pay more than they otherwise would have.
The Ninth Circuit allowed the advertiser damages class to move forward in 2024. The Supreme Court declined Meta’s request to review that decision in January 2025.
The Meta case wasn’t brought by the FTC and doesn’t involve auction pricing. But it raises a similar issue around the information advertisers rely on when deciding how much to spend.
Amazon’s case puts that question directly on the mechanics that determine what advertisers pay.
What This Means For Advertisers
For now, Amazon advertisers should continue managing their campaigns as usual while the case moves through the courts.
Advertisers with significant historical spend may want to preserve campaign data from the period covered by the FTC’s allegations. That includes spend, bids, CPCs and other performance data that could become relevant as the case progresses.
The FTC is seeking monetary relief as part of the lawsuit, although it’s far too early to know whether individual advertisers could receive compensation or what that process might look like.
Historical performance data could also give advertisers more context around the periods covered by the FTC’s allegations. The agency claims Amazon increased its advertising surcharges during high-volume shopping periods, including Prime Day and Black Friday.
Advertisers should be careful about drawing conclusions from CPC trends alone. Higher CPCs during major shopping periods can come from increased competition, seasonality and changes in advertiser demand. Historical campaign data isn’t likely to show whether Amazon’s soft reserve price caused a particular CPC increase.
That limitation gets closer to what makes this case relevant for advertisers.
Advertisers know the bid they submitted, the CPC Amazon charged and the performance that followed. They have far less information about the calculations Amazon used to get from the bid to the final price.
That leaves advertisers largely dependent on the platform to accurately explain how those calculations work.
The FTC’s case will test whether Amazon provided enough information about its auction mechanics and whether any lack of disclosure caused advertisers to pay more.
What Happens Next
The lawsuit is still in its early stages, and Amazon has made clear it plans to fight the FTC’s allegations.
The case could take years to resolve, especially if either side appeals. In the meantime, the court will have to consider how Amazon represented its auction mechanics to advertisers and whether its use of soft reserve prices violated consumer protection laws.
The outcome could also provide more clarity around what advertising platforms need to disclose when changes to their auction systems affect pricing.
For Amazon advertisers, there isn’t much to act on yet beyond keeping historical campaign and performance data available as the case moves forward.
We’ll continue to follow the lawsuit and update this article as the case develops.
