Amazon faces a lawsuit alleging that secret surcharges in its advertising auctions inflated revenue. The Federal Trade Commission and 22 state attorneys general filed the complaint, claiming the e-commerce giant manipulated pricing to boost its own business.
Hidden fees and price hikes
The FTC alleges that Amazon secretly added a “soft reserve price” to its second-price auctions. This practice, which began in 2019, caused advertisers to pay significantly more than the standard auction rules dictated. The agency says Amazon executives were aware of the backlash this approach could spark and kept it hidden to avoid damaging advertiser trust.
Prices were inflated during normal shopping periods, with far greater increases applied during high-volume events like Prime Day and Black Friday. Amazon allegedly ramped up prices in the lead-up to these events to mask the full extent of the hikes. The complaint claims the practices affected over 1 million brands and delivered tens of billions in revenue to Amazon’s business.
The FTC asserts that these actions constitute unfair and deceptive conduct. Chair Andrew N. Ferguson stated that the company misled millions of advertising customers into paying significantly higher prices, costs that were largely passed on to American consumers.
According to the complaint, Amazon presented advertisers with a choice between a first-price model—where the winning bid is paid in full—and a second-price model, where the winner pays only a minimal increment above the next highest bid. In theory, the second-price structure encourages participants to submit higher bids because the final payment is insulated from the exact amount of the bid. The FTC points out that the insertion of a hidden surcharge into this framework effectively turned a transparent pricing mechanism into a concealed cost driver, altering the economic calculus for every participating brand.
Internal documents referenced in the filing describe the surcharge as a “soft reserve price,” a term that suggests a floor beneath which the auction would not settle, yet the documentation also labels it as hidden. The FTC argues that this dual labeling demonstrates a conscious decision to obscure the financial impact from advertisers while still extracting additional revenue. Moreover, the agency highlights that the timing of the surcharge escalations—particularly as major shopping events approached—was designed to blend the added costs into the natural surge of seasonal spend, thereby reducing the likelihood that advertisers would notice the deviation from expected pricing.
Beyond the immediate financial impact, the complaint emphasizes that the practice undermines the trust relationship that underpins the advertising ecosystem. By altering auction outcomes without clear disclosure, the FTC asserts that Amazon compromised the ability of brands to make informed bidding decisions, a cornerstone of fair market competition.
Amazon’s response
Amazon responded with a detailed blog post rejecting the FTC’s claims of harm. The company argues that cost per click for Sponsored Product Ads remained flat when adjusted for inflation between 2019 and 2024, while conversion rates rose 24%. It claims the specific practices, such as soft reserve prices, are common in the industry.
Related: Nuuly Boosts Urban Outfitters’ Sales
In its rebuttal, Amazon suggested the FTC cherry-picked materials from outdated or simplified documents. The company emphasized that internal emails expressing ideas or testing hypotheses should not be interpreted as proof of a collective intent to deceive. It described the writing culture as one where people use email as a brainstorming medium, often expressing ill-formed thoughts that change later.
Analysts note that the outcome of this case remains uncertain. Cases of this nature often take years to resolve. Advertisers face a difficult position given Amazon’s dominant market share, with Emarketer’s Zak Stambor noting that the platform is “incredibly hard to walk away from.”
Amazon’s blog post further contends that the mechanisms under scrutiny are not unique to its platform, arguing that many digital ad marketplaces employ similar reserve pricing strategies to manage inventory and ensure auction stability. By framing the practice as an industry norm, Amazon seeks to shift the narrative from one of deliberate deception to a broader discussion about standard operating procedures across the sector.
The company also showed the dynamic nature of its advertising products, noting that performance metrics such as click-through rates and conversion efficiency have improved over the period in question. This argument is intended to demonstrate that advertisers have derived tangible value from the platform despite any alleged pricing adjustments, thereby weakening the FTC’s assertion of net harm.
Regulatory observers point out that this lawsuit is the third major FTC action targeting Amazon in recent years, following a settlement related to its Prime subscription service and an upcoming antitrust trial concerning its overall retail dominance. The succession of cases reflects a growing appetite among policymakers for greater oversight of the retail media setting, a segment where Amazon commands a substantial share of ad spend and where calls for standardized transparency have intensified.
Industry analysts highlight that the sheer scale of Amazon’s advertising business, now ranking as the third-largest digital ad platform, amplifies the stakes of any legal challenge. The concentration of spend on a single marketplace creates a structural dependency for brands, limiting their ability to diversify away from Amazon without sacrificing access to a massive consumer base. This dependency, combined with the platform’s integrated shopping experience, reinforces the argument that advertisers have few viable alternatives, a point repeatedly emphasized in market commentary.
While the FTC’s complaint focuses on the alleged hidden surcharge, it also raises broader questions about how digital marketplaces disclose pricing structures to their clients. The call for more uniform reporting standards is echoed by several trade groups, who argue that clearer guidelines would help advertisers evaluate costs across different channels and mitigate the risk of undisclosed fees. As the case proceeds, both legal and industry stakeholders are likely to watch closely for any precedents that could reshape the way online ad auctions are designed and communicated.
