The FTC Says Amazon Secretly Inflated Your Ad Costs
By Archit Mathur · Published · Last updated
Short answer
On 31 August 2026 the FTC and 22 states sued Amazon in the Western District of Washington, alleging that since 2019 it secretly replaced its advertising auction results with higher prices it set itself, taking over $20 billion from approximately 1.2 million US advertisers including more than 500,000 small and medium businesses. These are allegations. No claims process exists.
Every seller who has run Sponsored Products has had the same private suspicion at some point: that the cost per click drifted upward for reasons that had nothing to do with competitors. On 31 August 2026 the Federal Trade Commission and twenty-two states filed a complaint that says exactly that, and says Amazon did it deliberately.
This page is about what the complaint actually alleges, because the wire coverage has been written for investors and the trade press has been written for advertising agencies. The question an FBA seller asks is narrower: was my ACoS ever real, and is anyone going to give me anything back.
Read this first
Everything below is an allegation in a filed complaint. Amazon has not been found liable for anything described here, and a complaint is one side of a case stating what it intends to prove. It is worth reading closely anyway, because it is built almost entirely on quotations from Amazon's own internal documents.
What was filed, and by whom
The complaint (opens in a new tab) was filed on 31 August 2026 in the United States District Court for the Western District of Washington as case number 2:26-cv-03097. The plaintiffs are the FTC and the attorneys general of twenty-two states: Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont and Washington.
The FTC set out its allegations in a statement the same day (opens in a new tab). The complaint itself runs to 181 pages. Its opening paragraph states that since 2019 Amazon has "secretly and systematically overcharged its approximately 1.2 million advertising customers by manipulating the auctions that it uses to set the price of ads on its platform," and that based on internal documents describing "hidden" "surcharges," the conduct "has likely illegally extracted over 20 billion dollars."
Three products are named: Sponsored Products, Sponsored Brands and Sponsored Display. The complaint identifies Sponsored Products as Amazon's largest advertising product, and states that the affected customers include more than 500,000 small and medium-size businesses. It also notes a 2022 internal Amazon study of who buys its most lucrative advertising placements; the finding is redacted, but the sentence describes those customers as new or small business owners.
What a second price auction was supposed to guarantee
Since roughly 2012 Amazon has described its advertising auctions as generalised second price auctions. Bidders are ranked by a combination of bid and relevance, and the winner pays only the minimum needed to beat the next-ranked advertiser rather than their own bid.
This is not a technicality. It is the reason every PPC guide ever written tells you to bid your true maximum value per click. In a genuine second price auction, bidding high cannot hurt you, because the mechanism, not your restraint, sets the price. The complaint quotes Amazon training materials illustrating it with three bids of $0.75, $0.60 and $0.45, where the $0.75 bidder wins and pays approximately $0.61.
The complaint alleges Amazon made these representations on its advertising website, in training courses and videos, and in presentations given directly to advertisers, and continued to make them through 2026 — years after, it alleges, the pricing had stopped working that way.
What the complaint says actually happened
The allegation is not that Amazon rigged which ad won. It is that Amazon let the auction run normally, determined the winner and the genuine second price, and then replaced that price with a higher one of its own before charging the advertiser.
The complaint quotes the Senior Vice President in charge of Amazon Ads describing it internally: in Amazon's auctions "the second price isn't set by an actual bidder, but rather by" Amazon, in the form of a "proxy 2nd price that we calculate." An Amazon Senior Scientist is quoted describing the same mechanism as "an invented auction participant representing how much Amazon thinks that particular ad slot is worth." Amazon internally called the gap between the real auction price and the charged price a "surcharge."
On timing, the complaint alleges Amazon began in 2018 with Sponsored Brands, and a footnote states that internal documents indicate Amazon began using surcharges for Sponsored Products search placements in July 2019. Display followed later. The actual average surcharge rate is redacted in the public version, as is the higher rate the complaint says applied on peak shopping days.
Two different hidden floors
The complaint distinguishes a soft reserve, which replaces the second price after the auction has run, from a hard reserve, an undisclosed floor a bid has to clear to enter the auction at all. It alleges both were raised over time. Neither is the published minimum bid you can see in your campaign settings.
The paragraph every seller should read
Most of the complaint is about concealment. One section is about sellers' money directly, and it is the reason this page exists.
The complaint alleges Amazon understood that advertisers judge campaigns primarily by return on ad spend, and tuned its pricing to capture as much of that return as it believed it could take without provoking a reaction. It quotes a 2020 internal memorandum from the Sponsored Products auction team: advertisers "seem to be more directly responding to ad spend/RoAS changes as opposed to clicks being charged first price," and "given the empirical data we have on advertiser response to RoAS changes, we will use it as the main signal to tune our pricing controls."
A 2023 memorandum is quoted asking "how much more can we push for soft reserve" and "at what point will we see advertisers respond to an increase in soft reserve." The complaint says that after Sponsored Products ran experiments and observed no "significant changes in bids and budgets by advertisers," it raised hard reserves for top-of-page placements in the US marketplace.
The sharpest line is attributed to an Amazon engineer explaining why a large-scale pricing experiment was run at all: "In Q1 2023, US SP search RoAS … [was] significantly higher than other Amazon ads products or other ad platforms … so we hypothesized that a further increase in CPC and decrease in RoAS can be sustained by the marketplace." The first ellipsis marks a redaction in the filing; the second is the complaint's own.
What that sentence means if it is true
Your Sponsored Products campaigns performing well was not, on this account, a signal to leave them alone. It was the input to a decision about how much more they could be charged. The ceiling on your return on ad spend would then not be a market outcome you could optimise against — it would be a setting.
Why you could not have detected this
This is the part that generalises beyond advertising. The complaint alleges Amazon repeatedly confirmed through its own testing that advertisers were unable to detect the practice, and that as its confidence grew it increased the surcharges. It alleges Amazon added and fine-tuned design features to help "mask" the surcharges, tested increases incrementally to assess the risk of detection, and responded to customer complaints about suspicious price increases by denying any role in raising them.
The structural reason is stated plainly: the auction process and its reporting are "opaque," so an advertiser cannot know whether the price charged was the minimum needed to win, as promised, or a number Amazon supplied. Internally, the complaint alleges, the concern about disclosure was "irrevocable damage to advertiser trust" and a "downward spiral" of advertisers lowering bids or reducing spend.
There was no notification because there could not be one. A per-click surcharge that is disclosed stops working. That is a stronger version of the pattern this site keeps documenting: the changes that cost you most are the ones with no line item.
How this stacks on the change from 1 August
For sellers in the cohort Amazon moved on 1 August 2026, the two facts meet in one account balance. Per Amazon's notice (opens in a new tab) to the advertisers it contacted directly, the available payment methods were changed to paying from the seller or vendor account balance or Pay by Invoice — and anyone who did not choose had their default set to deduction from the account balance. So for that cohort ad spend now comes out before disbursement is calculated, unless they actively elected otherwise.
| What it changes | Status | |
|---|---|---|
| Auction pricing (alleged, since 2019) | What each click costs, before it reaches any invoice | Contested in litigation, filed 31 August 2026 |
| Payment method (effective 1 August 2026) | When you fund that cost, and from which balance | Confirmed by Amazon, for a contacted group |
The order matters. If the complaint is right, an inflated per-click price is now drawn from the balance Amazon is already holding, rather than from a credit card that gave you thirty days to notice. The cash-flow change did not cause the pricing issue. It removed the last gap between the two.
What a seller can actually do right now
Very little, and it is better to say so than to invent a task list. There is no claims process. Nobody is collecting evidence from sellers. Any firm offering to register you for a payout from this case is selling you something that does not exist yet.
Three things are worth doing anyway. Keep your advertising invoices and campaign history rather than letting reporting windows age them out, because a remedy that ever arrives will be calculated from spend records. Treat any historical cost-per-click or ACoS benchmark you built between 2019 and now as measuring a price that, on these allegations, you did not wholly control — which matters most if you use those benchmarks to judge whether a category is viable. And separate the two questions you may have been treating as one: whether your campaigns are well built, and whether the clearing price was fair.
What a remedy would realistically look like
The FTC brings its claims under Section 5(a) of the FTC Act and seeks a permanent injunction under Section 13(b). The plaintiff states seek more: injunctive relief, rescission or reformation of contracts, restitution, refund of monies paid, disgorgement of ill-gotten gains, civil penalties, fees and costs. Restitution is therefore on the table, but as a request in a complaint filed a matter of days ago.
The most recent comparable gives a sense of the timeline. In September 2025 the FTC settled its Prime enrolment case (opens in a new tab) against Amazon for $2.5 billion — a $1 billion civil penalty and $1.5 billion in refunds. Amazon sent automatic refunds to eligible customers in November and December 2025, began sending claim notices in January 2026 for those who did not get one, and, per the FTC's refunds page (opens in a new tab), expects to send claims-process payments in late 2026 with no mailing date yet set.
That case settled. In this one no answer has yet been filed. If it follows a similar arc, the useful planning assumption is years rather than months, and the thing that determines whether you can participate is whether your own records still exist when it matters.
What Amazon says
Amazon published a response the same day (opens in a new tab), calling the suit "misguided" and saying it "strongly disagrees." Its argument is not that reserve pricing did not exist; it is that no advertiser was harmed by it, and the figures it offers are checkable against your own account, which makes them more useful to you than the adjectives on either side.
| Amazon says | Figure |
|---|---|
| Average cost-per-click, Sponsored Products search, 2019-2024 | Flat, adjusted for inflation |
| Conversion rates, 2021-2025 | Grew 24% |
| Average winning bids, Sponsored Products search, 2019-2025 | Fell 50% |
| Placed ads not given to the highest bid | Roughly 92% |
| Estimated advertiser saving from relevance-weighted ranking, 2021-2025 | Over $8 billion - but Amazon offers this only by accepting what it calls the FTC's flawed premise that advertisers do not adjust their bids |
Amazon also argues the case "fundamentally misunderstands how advertisers operate," on the basis that advertisers adjust bids to real-world performance rather than to descriptions of auction mechanics; that the complaint cites no evidence of consumer price increases; that in no scenario does an advertiser pay more than their bid; and that after reviewing approximately 1.5 million pages the FTC "leans on a handful of simplified communications" to allege a companywide effort to deceive. It says it updated advertiser disclosures in 2018 to state that bids are maximum charges, and later revised its help content to describe reserve prices explicitly — which is a direct answer to the concealment allegation and will be one of the contested questions in the case.
The one thing you can check yourself
Amazon's central defence is that inflation-adjusted CPC was flat from 2019 to 2024 while conversion improved. You have your own campaign history for those years. Whatever the court eventually decides about the auction mechanics, whether your own cost per click and conversion moved the way Amazon describes is a question about your data, not about the litigation.
What is established and what is not
| Established | Alleged, not established |
|---|---|
| A complaint was filed on 31 August 2026 by the FTC and 22 states, No. 2:26-cv-03097 (W.D. Wash.) | That Amazon overrode auction results with prices it set itself |
| It names Sponsored Products, Sponsored Brands and Sponsored Display | That the conduct extracted over $20 billion |
| It is brought under FTC Act section 5(a) and section 13(b) | That the conduct reached approximately 1.2 million US advertising customers, including 500,000+ SMBs |
| The complaint runs to 181 pages, with the surcharge rates redacted | That Amazon concealed the practice for more than seven years |
| The plaintiff states seek restitution and refunds among other relief | That any seller is owed any specific amount |
What the redactions do and do not cover
The public version withholds the surcharge rates themselves — the average rate and the higher peak-day rate are both blacked out, so anyone publishing a specific per-click overcharge figure is estimating rather than reporting.
What is not redacted is how often the mechanism bit, and those numbers are the ones that matter to a seller. The complaint alleges at paragraph 76 that the surcharge increase resulted in Amazon charging Sponsored Products advertisers "their own winning bid close to 80% of the time," and that Amazon thereby "effectively and secretly converted its nominally ‘second price’ Sponsored Products auctions into first price auctions." An internal Sponsored Products operating plan is quoted at paragraph 189 recording that in 2024 the "first price rate was 79.1%," which the plan says "means that we are close to charging the maximum amount the winning ads are currently bidding." For Sponsored Brands, paragraph 77 alleges Amazon sets the price for 70% of ad clicks and charges the full bid half the time.
Why the 80% is the number to carry
Read it against the second-price section above. The reason you were told to bid your true maximum was that the mechanism, not your restraint, would set the price. On the complaint's account that protection was absent in roughly four auctions out of five, and the internal document says the quiet part: with a first-price rate near 79%, Amazon was "close to charging the maximum amount the winning ads are currently bidding." If that is right, a bid you set as a ceiling was functioning as a price.
Nothing told you, and nothing was going to
The changes this site usually writes about are announced somewhere and land somewhere else: a forum post fifteen days before a surcharge, an email to a cohort about ad billing, a policy page that shifts a deadline. The complaint describes something different in kind. On its account there was no announcement to miss, because disclosure would have ended the practice.
That is worth sitting with before the next fee change arrives. Most of what erodes an FBA margin is announced badly. Some of it is not announced at all, and the only defence is watching your own numbers closely enough to notice when they move — which is a great deal easier when something is watching them for you.
Frequently asked questions
What is the FTC lawsuit against Amazon about?
The FTC and 22 state attorneys general filed a complaint on 31 August 2026 in the Western District of Washington alleging that Amazon told advertisers its ad prices were set by second price auctions while secretly replacing the auction result with a higher price it set itself. The complaint alleges this extracted over $20 billion from approximately 1.2 million US advertising customers since 2019. These are allegations, not findings.
Does this affect Amazon sellers or only big advertisers?
Sellers are the bulk of it. The complaint covers Sponsored Products, Sponsored Brands and Sponsored Display, says Sponsored Products is Amazon's largest advertising product, and states that the approximately 1.2 million affected US advertising customers include more than 500,000 small and medium-size businesses.
Will Amazon sellers get a refund from the FTC ad lawsuit?
Nothing is owed to anyone yet. The case was filed on 31 August 2026 and has not been decided. The FTC seeks a permanent injunction; the plaintiff states additionally seek restitution, refund of monies paid, disgorgement and civil penalties. If a remedy ever arrives it will follow a judgment or settlement, not an application you can file today.
What is a second price auction on Amazon?
In a generalised second price auction the winning advertiser pays only the minimum needed to beat the next-highest-ranked ad rather than their own bid. Amazon has described its ad auctions this way since roughly 2012. That structure is why sellers are advised to bid their true maximum: the mechanism is supposed to protect them from actually paying it.
What is a soft reserve price?
It is the internal name the complaint attributes to Amazon for an undisclosed floor inserted into its ad auctions. Rather than a published minimum bid, the complaint alleges it operates after the auction runs, replacing the genuine second price with a higher number Amazon calculates. A separate undisclosed floor that bids must clear to enter the auction at all is described internally as a hard reserve.
What does Amazon say about the FTC ad lawsuit?
Amazon published a response on 31 August 2026 calling the suit misguided and saying it strongly disagrees. It says inflation-adjusted average cost-per-click on Sponsored Products search was flat from 2019 to 2024 while conversion rates grew 24% from 2021 to 2025, that average winning bids fell 50% from 2019 to 2025, that roughly 92% of placed ads do not go to the highest bid, and that - accepting only for argument what it calls the FTC's flawed premise that advertisers never adjust their bids - advertisers saved over $8 billion from 2021 to 2025 because it ranks on relevance rather than bid alone.
How often did Amazon charge advertisers their full bid?
The complaint alleges that after the surcharge increase Amazon charged Sponsored Products advertisers their own winning bid close to 80% of the time, and quotes an internal operating plan recording that in 2024 the first price rate was 79.1%. For Sponsored Brands it alleges Amazon sets the price for 70% of ad clicks and charges the full bid half the time. The surcharge rates themselves are redacted in the public complaint; these frequency figures are not.
What should I do about my Amazon ad campaigns now?
Nothing structural. No claims process exists and no evidence is being collected from sellers. Keep your advertising invoices and campaign history rather than letting the console age them out, and treat any historical benchmark you built for cost-per-click or ACoS as measuring a price the complaint says you did not fully control - while noting Amazon disputes that advertisers were harmed at all.
Sources
- 01
- 02FTC, States Sue Amazon Over Secret Ad Surcharge Scheme (opens in a new tab) — Federal Trade Commission
- 03Amazon's response to the FTC's lawsuit regarding Sponsored Ads (opens in a new tab) — Amazon (aboutamazon.com), 31 August 2026
- 04Update on advertiser payments (opens in a new tab) — Amazon Ads
- 05FTC Secures Historic $2.5 Billion Settlement Against Amazon (opens in a new tab) — Federal Trade Commission
- 06Amazon Refunds (opens in a new tab) — Federal Trade Commission
Get told automatically
Notifcentral computes margin after Amazon fees, cost of goods and advertising spend, and pushes an alert when it drops by more than your threshold - ten percentage points by default. Revenue dashboards show sales going up while margin quietly goes down; this alert watches the number that actually pays you.
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