The FTC Says Amazon Secretly Overcharged 1.2 Million Advertisers — Here's What to Check in Your Own Account

This article summarizes an active, contested legal case. Amazon disputes the allegations described below, and no court has yet ruled on their merits.

Key Takeaways

• The FTC and 22 state attorneys general sued Amazon on August 31, 2026, alleging the company secretly and systematically overcharged advertisers by more than $20 billion since 2019 through manipulated ad auctions.
• More than 500,000 of the 1.2 million affected advertisers are described in the complaint as small and medium-sized businesses — meaning this case directly touches a large share of the businesses that rely on Amazon's Sponsored Products platform.
• The core allegation is that Amazon told advertisers they'd pay only "one cent more" than the second-place bidder in its ad auctions, but the lawsuit claims Amazon actually charged winning advertisers their own full bid amount roughly 80% of the time.
• Amazon has forcefully denied the allegations, stating in a lengthy response that the FTC "fundamentally misunderstands how advertisers operate" and noting that average winning bids for Sponsored Products ads fell 50% between 2019 and 2025.
• This is the third major FTC lawsuit against Amazon in recent years, following a $2.5 billion settlement over Prime enrollment practices and an ongoing separate antitrust trial over alleged marketplace monopolization set for early 2027.

What the lawsuit actually alleges

The Federal Trade Commission, joined by attorneys general from 22 states, filed suit against Amazon in federal court in Seattle on Monday, August 31, 2026, alleging the company "secretly and systematically overcharged" more than 1.2 million advertising customers since 2019 by manipulating the auction system used to set prices for its Sponsored Products ads — the paid listings that appear at the top of Amazon search results. The complaint alleges Amazon "likely illegally extracted over $20 billion" from these advertisers through the scheme.

The specific mechanism described in the complaint centers on how Amazon's ad auctions are supposed to work versus how the FTC alleges they actually worked. Amazon's advertising system uses what's known as a second-price auction — an industry-standard model in which advertisers bid on keywords and ad placements, but the winning bidder is only charged one cent more than the next-highest bid, not their own full bid amount. That structure is designed to encourage advertisers to bid their true maximum value without fear of being charged that full amount if a rival's bid was actually much lower. The lawsuit alleges that starting in 2018, "Amazon began secretly manipulating its auction results to increase its ad prices" — specifically, according to CBS News's reporting on the complaint, by charging winning advertisers their own full bid roughly 80% of the time, rather than the lower second-price amount the auction structure was supposed to guarantee. The complaint further alleges Amazon "takes great pains to actively conceal from customers the fact that it inflates its purported auction prices."

Who's affected, and why the small-business detail matters

The complaint states that of the 1.2 million advertising customers affected, more than 500,000 — nearly half — are small and medium-sized businesses. That detail is central to why this case carries particular weight beyond its headline dollar figure: Amazon's advertising platform has become a critical customer-acquisition channel for small sellers competing on the platform, many of whom have limited ability to independently verify or audit how their ad spend is actually being calculated. If the FTC's allegations are accurate, businesses in this category would have been paying inflated advertising costs for years without a clear way to detect it, given the complexity and opacity the lawsuit alleges Amazon deliberately maintained around its auction mechanics.

The FTC also alleges a secondary harm: that these inflated advertising costs were "eventually passed down to Amazon shoppers" in the form of higher retail prices, since sellers factor advertising expenses into their overall pricing. That framing extends the alleged harm beyond advertisers themselves to Amazon's broader customer base.

Amazon's response

Amazon has pushed back forcefully and specifically. In a lengthy statement to CNN, the company said it "strongly disagrees" with what it called a "misguided" lawsuit, stating: "The FTC's claim fundamentally misunderstands how advertisers operate. Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics." Amazon also pointed to a specific data point in its defense: average winning bids for Sponsored Products ads fell 50% between 2019 and 2025, according to the company — a trend Amazon suggests is inconsistent with a systematic price-inflation scheme, since prices actually declined significantly over the period covered by the complaint. In a separate statement responding to the CBS News report on the lawsuit, Amazon added that its advertising auctions "prioritize products relevant to shopper search terms before considering bid amounts," which the company said helps shoppers find what they want while keeping prices down for advertisers.

It's important to note that these are allegations in an active legal proceeding, not established findings of fact. No court has yet ruled on the merits of the FTC's claims, and Amazon's defense — including the falling-average-bid data point — hasn't been independently evaluated by a court either. Both the FTC's specific allegations and Amazon's rebuttal should be treated as competing claims in ongoing litigation rather than settled conclusions.

How this fits into Amazon's broader, growing legal exposure

This lawsuit is notably not an isolated legal action against Amazon — it's the latest in a pattern of significant regulatory and legal challenges the company has faced in recent years. Last year, Amazon agreed to pay $2.5 billion to resolve a separate FTC investigation into its Prime subscription enrollment and cancellation practices — at the time, described by the FTC as the largest civil penalty ever obtained in a case involving violation of an FTC rule, consisting of a $1 billion civil penalty and $1.5 billion in consumer refunds. Separately, a major antitrust trial is scheduled for early 2027 over claims, originally filed in September 2023, that Amazon illegally maintains monopoly power in online retail markets, degrading quality for shoppers and overcharging sellers along the way. And in 2023, Amazon paid more than $30 million to resolve separate FTC claims that its Alexa voice assistant and Ring doorbell cameras improperly retained users' voice recordings, videos, and location data.

Advertising specifically represents a large and fast-growing part of Amazon's business, making this particular case strategically significant for the company beyond the direct financial exposure: Amazon's advertising division generated $68.6 billion in revenue last year according to company filings, making it one of Amazon's most profitable and fastest-growing segments — a business line the FTC's lawsuit now places under direct legal scrutiny.

Why this matters even beyond Amazon specifically

The lawsuit centers on second-price auctions, described in the CBS News coverage as "the industry standard for digital ad deals" — meaning the auction mechanism at the heart of this case isn't unique to Amazon. Second-price (or similar) auction structures are widely used across major digital advertising platforms. While this specific lawsuit alleges wrongdoing specific to Amazon's implementation, the case is likely to draw broader attention to how digital ad auction mechanics are disclosed and audited across the industry generally, given how foundational this auction model is to online advertising as a whole.

What this means if your business advertises on Amazon

• Review historical Sponsored Products ad spend for signs of the pattern alleged in the complaint, particularly if your business has run substantial Amazon advertising campaigns since 2019 — while the lawsuit's allegations aren't yet proven, they describe a specific, checkable mechanism (being charged your own bid rather than a lower second-price amount) that a detailed review of past invoices and bid data could help evaluate for your own account.
• Don't expect immediate changes to Amazon's advertising platform or pricing as a result of this filing alone. Civil litigation of this scale and complexity typically takes considerable time to resolve — through motions, discovery, and potentially trial — meaning any structural changes to how Amazon's ad auctions operate, if the FTC prevails, are unlikely to happen quickly.
• Watch for potential restitution or refund mechanisms if the case settles or Amazon is found liable. Amazon's prior $2.5 billion Prime settlement included direct consumer refunds as part of its resolution — a comparable outcome in this case, while not guaranteed, would be directly relevant to any business that qualifies as one of the alleged 1.2 million affected advertisers.
• Treat this as one more data point in a broader pattern of regulatory scrutiny of major digital advertising platforms, relevant context for any business heavily dependent on a small number of ad platforms for customer acquisition, independent of how this specific case resolves.

Frequently Asked Questions

Has Amazon been found guilty of overcharging advertisers? No. This is a civil complaint filed by the FTC and 22 state attorneys general — it represents allegations, not a legal finding. Amazon has denied the claims and disputed the FTC's characterization of how its advertising auctions work. The case will proceed through the normal civil litigation process before any liability is determined.

How can a business check whether it was affected by the alleged overcharging? Current reporting doesn't describe a specific tool or process for advertisers to check this independently. Businesses concerned about potential exposure may want to review their own historical Amazon advertising billing and bid data, and can watch for updates from the FTC or Amazon as the litigation proceeds, including any eventual settlement terms that might include a claims process.

What does it mean that this is a "second-price auction," and why does that structure matter to the case? In a second-price auction, the winning bidder is charged only slightly more than the next-highest bid, not their own full bid amount — a structure designed to encourage advertisers to bid honestly without fear of overpaying relative to actual competition. The lawsuit's core allegation is that Amazon didn't actually apply this structure as advertised, instead charging winners their full bid amount in a large majority of cases.

Is this related to Amazon's separate antitrust trial? It's a distinct legal matter, though part of the same broader pattern of regulatory scrutiny. The antitrust trial, scheduled for early 2027, centers on different allegations — that Amazon illegally maintains monopoly power in online retail generally — while this advertising lawsuit is specifically focused on Amazon's ad auction pricing practices.

Sources & References

• CNN Business, "FTC sues Amazon, alleging it overcharged advertisers" (August 31, 2026)
• CBS News, "FTC and 22 states sue Amazon over alleged secret ad surcharge scheme"
• CNBC, "FTC sues Amazon, accusing the e-commerce giant of misleading advertisers" (August 31, 2026)
• TechCrunch, "FTC accuses Amazon of running a 'secret ad surcharge scheme' in new lawsuit"
• Bloomberg (via Insurance Journal), "Amazon Sued by FTC Over Claims It Misled Advertisers on Pricing"
• Claims Journal, "Amazon Sued by FTC Over Claims It Ripped Off Advertisers"

Related Reading

For a look at how a different major AI company's advertising business is scaling at the same time, see PrimeWorldMedia's coverage of OpenAI's ad business hitting a $1 billion run rate — a useful contrast, since that story covers a business built from scratch under current regulatory scrutiny of digital advertising practices industry-wide.