The FTC's Amazon ad auction lawsuit: what it alleges and what to check

On August 31, 2026, the Federal Trade Commission and 22 state attorneys general sued Amazon over how it prices Sponsored Ads. The 181-page complaint alleges that Amazon told advertisers its auctions were second-price, then added a hidden surcharge it called internally a "soft reserve price."

Amazon denies it. In its response it calls the suit "misguided" and says: "In no scenario does an advertiser pay more than their bid."

None of it had been proven as of November 4, 2026. But the complaint cites figures it attributes to internal Amazon documents on how often winning advertisers paid their full bid, and that's useful to anyone setting bids, whatever the court decides.

What the FTC's complaint alleges#

The complaint, Federal Trade Commission et al. v. Amazon.com, Inc. (Case 2:26-cv-03097), was filed in the US District Court for the Western District of Washington. The FTC's claims are brought under Section 5(a) of the FTC Act, which covers deceptive and unfair practices. Each state adds claims under its own consumer protection law. The Commission voted 2-0 to file.

The central allegation is about what happens after the auction. In a generalized second-price auction, the winner pays roughly what it took to beat the next bidder. The complaint alleges that "after Amazon runs the auction, it secretly replaces the GSP auction price with a higher 'soft reserve' price." It quotes a senior Amazon Ads executive, not named in the public version, describing the second price as a "proxy 2nd price that we calculate."

According to the complaint, this started with Sponsored Brands in late 2018, reached Sponsored Products in 2019 and display auctions by 2023. It says the practice touched about 1.2 million US advertisers, including more than 500,000 small and medium-size businesses, and alleges Amazon "likely illegally extracted over 20 billion dollars." The FTC's press release puts that at "tens of billions." FTC Chairman Andrew N. Ferguson said that "Amazon has millions of advertising customers who were misled into paying significantly higher prices."

The FTC wants a permanent injunction and monetary relief. The states also ask for civil penalties, restitution and disgorgement.

The numbers the complaint quotes#

The figures that matter most to an advertiser are the complaint's "first price rate": the share of clicks where the winner paid its own bid rather than a lower second price. In a true second-price auction that number should be low.

The complaint also says Amazon tested raising the rate for some advertisers in Spain from 48% to 80% in 2024. The FTC's press release says increases were "far greater" on high-volume days like Prime Day and Black Friday. The surcharge rates themselves are redacted in the public version.

What Amazon says back#

Amazon's response describes the soft reserve as a real-time estimate of what a placement is worth. When the winner's bid beats both the hard and soft reserve, "they pay the soft reserve," and if it doesn't meet the soft reserve, "they pay their bid."

It makes four claims on the numbers. From 2019 through 2024, average cost per click "remained flat when adjusted for inflation." In 2024, "approximately 92% of selected Sponsored Products ads were not the highest bid," because relevance counts as well as price. Advertisers "saved over $8 billion from 2021 to 2025." And the average winning Sponsored Products bid fell 50%, which Amazon dates to 2019 through 2024 in the body of its post and 2019 through 2025 in its summary. It closes: "We look forward to making our case in court."

Our read: bid like the price is your bid#

The two sides describe the soft reserve very differently. The complaint says it's a hidden surcharge on top of the second price. Amazon says it's an estimate of a placement's true market value, and that when it applies the winner pays "the soft reserve, which is less than they were willing to pay." What matters day to day is the complaint's figure: if it's anywhere near right, most winning Sponsored Products clicks in 2024 cost the full bid.

That breaks a common habit: bidding high on the theory that the auction will charge you less. On Amazon, the safer working assumption is that your bid is your price. Set it from what a click is worth at your conversion rate and margin, not from a second-price theory that the complaint alleges stopped holding well before 2024.

We also think the case raises the bar for reporting. Average cost per click against average bid is a number every advertiser can pull from its own reports. It's on our retail media audit checklist, and it belongs in the monthly review of any brand running Amazon advertising. For the legal side, and what the suit might mean for you, talk to your own counsel. We're not lawyers, and as of November 4, 2026 the case is at an early stage.

What to check before the 2026 holiday peak#