The Federal Trade Commission and 22 state attorneys general have sued Amazon, alleging the company secretly inflated the price of its search advertising auctions for over seven years. It's a direct challenge to retail media transparency.
Amazon executives played an active role in concealing this behavior, the complaint states, while the company believed disclosure could cause "irrevocable damage to advertiser trust," per internal documents quoted in the FTC's release.
Search advertising, including Sponsored Product Ads, still makes up the lion's share of Amazon's ads business, which neared $70 billion in revenue in 2025 and constitutes the third-largest digital ad platform behind Google and Meta.
The federal case arrives amid renewed calls for greater standardization and transparency in retail media, a category where Amazon dominates spending, controlling around three-quarters of the total U.S. market per analyst estimates. The FTC claims Amazon's practices affected over 1 million brands while delivering tens of billions in revenue to its own business.
"The allegations raise uncomfortable questions about how transparent Amazon is with advertisers, and whether they were paying more than they realized," Emarketer principal analyst Zak Stambor said in emailed comments.
As outlined in the complaint, Amazon offered advertisers a first-price auction, where they pay the amount of their winning bid, and a second-price auction, where winners pay one cent more than the next highest bidder for each successful bid on a keyword.
Due to the nature of second-price auctions, also known as GSPs, advertisers often bid higher, recognizing they will "only be liable to pay the least bid amount needed to win under the auction's rules."
Amazon in 2019 altered its rules to include what one internal document called a "hidden" surcharge within GSPs. This surcharge, referred to internally as a "soft reserve price," led advertisers to pay "substantially" more than the price the GSP auction would suggest.
Prices were inflated during normal shopping windows, and Amazon applied "far greater increases" for high-volume shopping occasions including Prime Day and Black Friday. The FTC says Amazon was aware of the backlash the approach could spur — hence the secrecy — and would steadily ramp prices in the lead-up to events like Prime Day to mask the extent of the hike.
"When one of the world's largest online retailers engages in unfair and deceptive conduct, the impact can be staggering," FTC Chairman Andrew N. Ferguson said. "Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers."
Amazon pointed to a lengthy blog post rejecting the FTC's claims of consumer or advertiser harm.
Amazon argues the cost per click for Sponsored Product Ads, a focus of the case, was flat when adjusted for inflation between 2019 and 2024, while conversion rates rose 24%.
"The FTC's claim fundamentally misunderstands how advertisers operate. Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics," Amazon wrote.
Amazon said the practices under scrutiny, including soft reserve prices, are common in the industry and that the FTC cherry-picked materials from outdated or simplified documents. It also pushed back on the idea of a widespread internal effort to knowingly deceive advertisers.
"With a writing culture like we have, people at times use email as a brainstorming and suggestive medium, expressing ideas, testing hypotheses, but sometimes expressing thoughts that are either ill-formed or that they change later with the benefit of conversation and other views," the post said. "A stray email is not indicative of a team's intent or even collective viewpoint."
This is the third FTC case against Amazon in recent years, following suits over its Prime subscription, which Amazon settled, and a monopoly over online retail set to go to trial next year.
Cases of this nature take a long time to play out, and the response from advertisers may be muted given Amazon's dominant position.
"Advertisers face a tough challenge because Amazon is incredibly hard to walk away from," Stambor said. "We expect Amazon to generate $927.82 billion in worldwide retail ecommerce sales this year, thanks in large part to its Prime membership program, which gives it an ironclad grip on shoppers. That combination makes Amazon's ads particularly powerful and gives advertisers few easy alternatives, even as scrutiny of the platform grows."
What the case confirms is that a gap can exist between the described auction mechanics and what you're actually charged. Even Amazon's defense is that "advertisers adjust bids based on real-world performance, not descriptions of auction mechanics."
Which points at the response: measure actual spend against outcomes on your own baseline rather than trusting the described rules. It's the same reason independent measurement matters when platforms grade their own homework. Logging the cost-per-click increase across major shopping events gives you a basis to judge how much more you're paying next Prime Day.
That from 2019 it inserted a hidden surcharge — internally called a 'soft reserve price' — into second-price auctions, causing advertisers to pay substantially more than the auction rules would produce.
That Sponsored Product cost per click was flat inflation-adjusted from 2019 to 2024 while conversion rates rose 24%, that soft reserve prices are common industry practice, and that the FTC cherry-picked outdated documents.
Measure actual spend against outcomes on an independent baseline rather than trusting described auction mechanics, and log cost increases across major shopping events to create a comparison point.
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