FTC says Amazon quietly inflated ad auction prices for seven years. The bill runs into tens of billions

The Federal Trade Commission and attorneys general from 22 states have sued Amazon in federal court in Washington state, alleging that since 2019 the company has been overcharging advertisers in its search ad auctions. According to the complaint, more than a million brands and sellers paid inflated prices, and the FTC puts Amazon’s gain from the practice at more than 20 billion dollars.

Amazon sold its sponsored placements as second-price auctions, in which the winner pays one cent more than the next-highest bid. The regulator says the company added a hidden “soft reserve price”, in effect a phantom bidder that pushed the final price close to the advertiser’s own maximum. The complaint says the mechanism applied to 30 to 40 percent of auctions in 2021 and to about 80 percent by 2024, with the steepest mark-ups during Prime Day and Black Friday. FTC chairman Andrew Ferguson put it bluntly: “Amazon has millions of advertising customers who were misled into paying significantly higher prices.”

Amazon rejects the allegations and calls the lawsuit misguided. It says the average cost per click for Sponsored Products stayed flat in real terms between 2019 and 2024, that conversion rates rose by roughly a quarter, and that reserve prices are standard practice across the industry. The company also argues that most winning ads in 2024 were not the highest bids, because relevance shapes the outcome as much as price. Internal emails cited in the complaint, it says, were brainstorming rather than policy.

Why this case is different

It is the first regulatory action aimed squarely at the auction mechanics of a closed retail media platform. Retail media has grown into the third-largest digital ad channel behind search and social, largely on the strength of purchase data that nobody outside the retailer can audit. That opacity is exactly what the case targets. Three FTC suits against Amazon are now running in parallel, and this one is unlikely to end in a break-up; fines, refunds and court-ordered changes to pricing are the more probable outcomes.

What it changes for buyers

Leaving is not a realistic option. Amazon remains the largest online store in the United States, and its ad inventory sits where the purchases happen. What changes is the negotiation. Advertisers and agencies now have a public, documented reason to ask any retail media network for auction documentation, for disclosure of reserve prices, and for contract clauses covering refunds if pricing practices are later found to be unfair. The case itself will take years. The questions can be asked this quarter.