The Federal Trade Commission, along with 22 states, is scrutinizing Amazon for alleged undisclosed surcharges in its ad auctions—a move they claim forced more than one million brands to collectively pay billions of dollars in excess charges over a seven-year period.
FTC and 22 States Challenge Amazon on Concealed Ad Auction Costs
The Federal Trade Commission (FTC) has joined forces with attorneys general from 22 states to file suit against Amazon, accusing the company of secretly increasing costs associated with search advertising auctions since 2017. As documented in the FTC’s official press release, executives at Amazon allegedly orchestrated and purposely hid these escalations because revealing them could do “irrevocable damage to advertiser trust,” according to the company’s internal records.
The FTC alleges that these hidden fees impacted over 1 million brands, funneling “tens of billions” of dollars to Amazon’s profit. Sponsored Product Ads, a major driver of Amazon’s advertising revenue, remain at the heart of its marketing platform. In 2025, Amazon’s annual ad revenue in this segment was nearing $70 billion, placing it as the third-largest entity in digital advertising, behind only Google and Meta. Industry analysts estimate that Amazon holds a dominant position, controlling roughly three-quarters of the U.S. retail media market.
How Alleged Surcharges Changed Ad Auctions
The complaint describes Amazon’s use of first-price and second-price (GSP) auction types within its platform. Typically, in second-price auctions, the top bidder pays just above the next highest offer. But the FTC claims that beginning in 2019, Amazon imposed a “soft reserve price”—a concealed surcharge—that led to considerably higher prices than would result from standard auction rules. This surcharge was reportedly ramped up around high-traffic events like Prime Day and Black Friday. To avoid detection and possible pushback, Amazon allegedly increased these surcharges incrementally in advance of such major shopping periods.
Andrew N. Ferguson, FTC Chairman, outlined the scope of the problem: “If one of the largest online retailers in the world uses unfair or deceptive practices, it affects a massive pool of customers. Millions of advertisers paid inflated costs, and those got passed on to U.S. consumers.”
Amazon Responds, Defends Industry Standards
Amazon refuted the FTC’s statements, publishing a response on its corporate blog denying any harm to buyers or advertisers. The company says that from 2019 to 2024, when adjusted for inflation, costs per click for Sponsored Product Ads stayed level, while conversion rates improved by 24% during that same timeframe—a key focus of the FTC’s allegations.
The tech giant maintains that advertisers choose bidding strategies based on real campaign results rather than the design of the auction itself, while highlighting that mechanisms like soft reserve prices are standard in the digital ad market. Furthermore, Amazon challenged the FTC’s reading of internal communications, stating that the agency drew upon “stray” or outdated documents that do not represent current business conduct or intent, pointing to the informal and shifting style of internal emails.
This lawsuit represents the third major FTC action against Amazon in recent years, following a Prime subscription settlement and an ongoing antitrust case centered on Amazon’s market dominance. Analysts suggest Amazon’s powerful position means that, even amid such allegations, most brands are unlikely to leave. The projection for Amazon’s 2024 global retail e-commerce sales sits at $927.82 billion, much of it tied to Prime membership and the reach of its advertising network.
Broader Industry Context and Continuing Legal Attention
This legal battle unfolds as industry organizations urge more transparency from retail media channels. Advertisers, say experts, may be unaware of how much extra they spend in these opaque auctions. Zak Stambor, principal analyst at Emarketer, notes that Amazon’s dominance means brands have little option but to continue buying ads, despite the growing legal and ethical concerns.
The proceedings promise to shape not only Amazon’s strategies but also set legal and operational benchmarks for how the broader retail and advertising tech sector manages auction transparency, surcharges, and the division of power between digital platforms and marketers.