FTC Sues Amazon Over Hidden Ad Auction Surcharges: What Sellers Should Do Now
The government's case will take years. Your claim has a clock on it, and the Business Solutions Agreement decides where you can bring it.
Short answer: On August 31, 2026, the Federal Trade Commission and 22 state attorneys general sued Amazon in the U.S. District Court for the Western District of Washington, alleging that Amazon secretly added an undisclosed surcharge to its advertising auctions beginning in 2019, converting what it marketed as a second-price auction into a first-price auction. The complaint covers more than one million brands and sellers, including over 500,000 small and medium-sized businesses. Sellers cannot join this lawsuit. Anyone who ran meaningful Sponsored Products spend since 2019 should export their historical advertising data now and have the arbitration path evaluated separately, because the Business Solutions Agreement's class action waiver forecloses riding along on anyone else's case.
Key Facts
- Filed
- August 31, 2026
- Court
- U.S. District Court, Western District of Washington
- Plaintiffs
- Federal Trade Commission plus 22 state attorneys general
- Commission vote
- 2-0 authorizing staff to file
- Ad formats at issue
- Sponsored Products, Sponsored Brands, Display Ads
- Conduct period
- Beginning 2019, alleged to be ongoing
- Advertisers affected
- More than 1,000,000 brands and sellers
- Alleged extraction
- Tens of billions of dollars
- Relief sought
- Civil penalties, restitution, injunctive and other relief
What exactly does the FTC say Amazon did?
The mechanics matter, so it is worth being precise.
Amazon sells advertising placements against keyword searches through an auction. For years, Amazon told advertisers this was a generalized second-price auction, the accepted standard in digital advertising. In a second-price auction, the winner pays only what is needed to beat the next highest bid, typically described as one cent above it. That design has a purpose: because bidders know they will not be charged their full bid, they bid closer to what a placement is genuinely worth to them. They do not need to shade their bids downward to protect against overpaying.
The FTC alleges that in 2019 Amazon added an undisclosed floor to the auction, referred to internally as a "soft reserve price," and did not tell advertisers. According to the complaint, the practical result was that Sponsored Products advertisers were charged their own winning bid close to 80 percent of the time. That is a first-price auction wearing second-price clothing.
The complaint frames the harm this way: advertisers kept bidding as though they were in a second-price auction, because Amazon told them they were, while actually paying first-price outcomes. The FTC alleges Amazon understood this and relied on it, and further alleges that Amazon used what internal documents describe as an invented auction participant and a calculated proxy second price, which the complaint characterizes as functionally equivalent to shill bidding.
| Year | Alleged share paying own bid |
|---|---|
| 2021 | Approximately 30 to 40 percent |
| 2022 | Approximately 70 percent |
| 2024 | Approximately 80 percent |
The complaint also alleges that Amazon increased the surcharges more aggressively on high-volume shopping days such as Prime Day and Black Friday, and ramped them up gradually in advance of those events to avoid detection.
Amazon has disputed the characterization, saying the FTC misrepresents how its auctions work and selected findings out of context. The company points to disclosures available inside its campaign management tools, states that inflation-adjusted average cost-per-click held flat, and says its auction systems delivered billions in savings to advertisers between 2021 and 2025. Amazon also notes the complaint identifies no shopper-level harm.
Why this matters more to sellers than a typical Amazon headline
Most regulatory news about Amazon is background noise for the average seller. This one is different for a specific reason: it goes to a line item that most sellers cannot avoid.
Advertising is not optional for the majority of private-label and brand-registered sellers. It is a fixed cost of visibility. If the allegations are accurate, the overcharge did not fall on a discretionary category of spend that a careful operator could have avoided. It fell on the one line item that a seller has to fund to stay in the search results at all, and it fell hardest during the quarters when volume was highest.
The second reason is that the alleged mechanism is invisible from the seller side. A seller reviewing a campaign report sees a cost-per-click. There is no field showing what the price would have been under an unmodified second-price auction. If the complaint's core allegation is correct, no amount of diligent account management would have revealed it.
The practical point: a seller who ran $200,000 in Sponsored Products spend annually since 2019 has roughly $1.4 million of exposure to whatever the overcharge rate turns out to be. Even a modest percentage produces a claim worth pursuing. That is arithmetic worth running before assuming this is someone else's problem.
Can sellers join the FTC lawsuit?
No, and this is the point where sellers most often go wrong.
The FTC action is a government enforcement proceeding. Private parties do not join it, do not intervene as plaintiffs, and do not get to shape the relief. There is also no private right of action under Section 5 of the FTC Act, so a seller cannot file its own version of this complaint under the same statute.
If the court orders restitution, the FTC may eventually administer a refund program. But a seller who waits for that outcome is accepting several things: that the case survives motion practice, that it is not settled on terms that limit individual recovery, that any fund is distributed on a formula the seller has no input into, and that the whole process runs its course before the seller's own limitations period expires. Those are four separate bets.
Where does a seller's own claim actually go?
Into individual arbitration, in most cases.
The Amazon Services Business Solutions Agreement contains a binding arbitration provision and a class action waiver. The March 4, 2026 update added a dedicated dispute resolution section, Section 20, addressing the arbitrator's authority while preserving the existing arbitration requirement and class waiver. Separately, Amazon reinstated mandatory arbitration and a class action waiver in its consumer-facing Conditions of Use effective August 14, 2026, after five years without them.
For a seller, the consequence is direct. You cannot wait for a private class action on advertising overcharges, because the class waiver is designed to prevent one from reaching you. Your claim is your own, brought individually, before the American Arbitration Association under the BSA's dispute resolution terms.
That is not the disadvantage it sounds like. Individual arbitration against Amazon over fee and charge disputes is a mature practice area with an established record. What it does mean is that the work has to be done account by account, and the seller's own data is the case.
What should sellers do now?
- Export historical advertising data immediately. Pull Sponsored Products, Sponsored Brands, and Display reports at keyword and placement level for every period back to 2019. Amazon retains many advertising reports only for limited windows. Data that is not exported may simply cease to be retrievable, and there is no mechanism to recover it later.
- Preserve the billing record separately. Monthly advertising invoices, payment records, and account-level spend summaries are a different data set from campaign reports and should be captured on their own. These establish the total dollars at issue.
- Capture bid configuration history. Bulk operations files showing what bids were set, and when, matter because the alleged harm is the gap between what the bidding strategy assumed and what was charged. Without the bid history, the gap is difficult to reconstruct.
- Preserve communications about auction mechanics. Any correspondence with an Amazon account manager, strategic account services representative, or advertising specialist discussing how the auction works or how to bid is potentially relevant. The complaint alleges Amazon gave misleading answers to advertisers who asked directly.
- Run the exposure calculation. Total advertising spend since 2019, broken out by year and by ad format, is the threshold number that determines whether an individual claim is worth pursuing. Do this before deciding anything else.
- Get the timing evaluated. Limitations periods apply and differ by legal theory, and the BSA contains its own contractual limitations language. Spend from the earliest years of the alleged conduct is the most likely to be time-barred. Waiting for the FTC case is the one strategy that guarantees the oldest and largest years fall away.
What happens next in the litigation
Expect motion practice first. Amazon has signaled it will contest the FTC's characterization of the auction mechanics, which sets up a dispute that is partly legal and substantially technical and economic. Cases of this profile do not resolve quickly.
This is also not Amazon's only front. The FTC's separate monopolization case, which centers on Amazon's treatment of third-party sellers, is now scheduled for a bench trial on March 29, 2027 before Judge John H. Chun in the same district. The two matters are distinct, but the advertising complaint's internal documents will be read closely by anyone litigating against Amazon on fee and charge theories, and the discovery record from one is unlikely to stay hermetically sealed from the broader picture.
For sellers, the practical horizon is simple. The government case will outlast several of your fiscal years. Your own data will not survive that long unless you take it out now.
Evaluate your advertising overcharge exposure
AMZ Sellers Attorney represents Amazon and marketplace sellers in AAA arbitration against Amazon over withheld funds, fee disputes, and charge overcharges under the Business Solutions Agreement. If you have run significant Sponsored Products spend since 2019, we can assess the size of your claim and the timing constraints that apply to it.
Request a case evaluationFrequently Asked Questions
Can I join the FTC lawsuit against Amazon over advertising overcharges?
No. The FTC action is a government enforcement proceeding, and private parties cannot join it or intervene as plaintiffs. There is also no private right of action under Section 5 of the FTC Act. If the court orders restitution, the FTC may later establish a refund process, but sellers cannot control that timeline or its adequacy. A seller seeking its own recovery must pursue a separate claim, which under the Amazon Business Solutions Agreement means individual arbitration.
What is a soft reserve price in an Amazon ad auction?
According to the FTC complaint, a soft reserve price is an undisclosed pricing floor Amazon added to its advertising auctions beginning in 2019. It raised the minimum an advertiser had to pay to win a placement above the price a genuine second-price auction would have produced. The FTC alleges the effect was to convert a nominal second-price auction into a first-price auction without telling advertisers.
Which Amazon ad types does the FTC complaint cover?
The complaint addresses Sponsored Products ads, Sponsored Brands ads, and Display Ads sold against keyword search results on Amazon.com and the Amazon mobile app. Sponsored Products is the format with the most detailed allegations, including the specific percentages of the time advertisers paid their own bid amount.
What advertising records should Amazon sellers preserve right now?
Sellers should export Sponsored Products, Sponsored Brands, and Display campaign reports at the keyword and placement level, bulk operations files showing historical bid settings, monthly advertising invoices and payment records, and account-level spend summaries going back to 2019. Amazon retains many advertising reports for limited windows, and data that is not exported may become unavailable. Sellers should also preserve any correspondence with Amazon account managers about auction mechanics or bidding strategy.
Does the Amazon Business Solutions Agreement force sellers into arbitration for advertising claims?
Yes, in most circumstances. The Business Solutions Agreement contains a binding arbitration provision and a class action waiver, and the March 4, 2026 update added Section 20 addressing dispute resolution and the arbitrator's authority. A seller with an advertising overcharge claim generally must bring it individually before the American Arbitration Association rather than in court or as part of a class.
Is there a deadline for bringing an Amazon advertising overcharge claim?
Yes. Limitations periods apply and vary by the legal theory asserted, and the Business Solutions Agreement itself contains contractual limitations language that may shorten the window further. Because the alleged conduct dates to 2019, older spend may already fall outside some applicable periods. Sellers with significant advertising spend should have counsel evaluate timing promptly rather than waiting for the FTC case to resolve.
About the author
Kenneth Eade is the founding attorney of AMZ Sellers Attorney, a Beverly Hills e-commerce and intellectual property firm representing marketplace sellers worldwide. Admitted to the California Bar in 1980 (Bar No. 93774), and the Ninth Circuit, he founded the firm in 2017 following his own experience as a seven-figure Amazon FBA seller. The firm's APEX patent work has been cited by Bloomberg Law, and he was quoted by name in EBONY in August 2026 on AI-generated books and author provenance. The firm is Sermondo Top 10-listed for ecommerce law and for Amazon reinstatement and suspension appeal services.
AMZ Sellers Attorney · 9350 Wilshire Blvd Suite 203, Beverly Hills, CA 90212 · [email protected]
Primary source: FTC, States Sue Amazon Over Secret Ad Surcharge Scheme, Federal Trade Commission, August 31, 2026. The complaint is available through the FTC's case page.
This article is provided for general informational purposes and does not constitute legal advice. Reading it does not create an attorney-client relationship with AMZ Sellers Attorney or Kenneth G. Eade. Allegations described here are allegations only; Amazon disputes them and has not been found liable. Outcomes in arbitration and litigation depend on facts specific to each account. Consult qualified counsel regarding your own situation.



















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