FTC & 22 States Sue Amazon For Alleged Ad Surcharge Scheme
On August 31, the FTC along with 22 US states, brought suit against Amazon for allegedly lying about its practices for selling advertisements on the platform. This news specifically impacts sellers who have participated in Amazon’s advertisement bidding process, as the FTC alleges deliberate attempts to deceive advertisement customers. In this blog, we discuss the details of the complaint and possible outcomes from the FTC’s action related to potential changes on the Amazon advertising platform.
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August FTC Litigation Against Amazon
On August 31, 2026, the FTC announced they were joining 22 states in bringing action against Amazon for alleged use of a secret surcharge scheme to increase profits from Amazon’s sale of advertisement on the platform. Federal Trade Commission v. Amazon.com Inc., 2:26-cv-03097. The FTC claims that despite claiming to run generalized second-price (GSP) auctions, Amazon used surcharges to increase profits to the levels of sealed first-price auctions.
The difference in auction type matters because “it impacts how [customers] bid” according to the FTC. First-price auctions require the winning bidder to pay the price of the winning bid in full, whereas GSPs are meant to lower the price to one cent higher than the second-highest bid. For GSPs, bidders may make riskier bids under the assumption that the final price will be lowered.
Instead, the FTC claims that Amazon used secret surcharges to increase the final prices that customers paid to levels as if they were first-price auctions, while claiming to run GSP auctions. The FTC states that:
The complaint alleges that Amazon’s unlawful scheme has generated tens of billions of dollars of revenue for the company by, for example, substantially increasing the prices charged to advertisers on ordinary shopping days and applying far greater increases to prices on high-volume shopping days like Prime Day and Black Friday.
Source: Federal Trade Commission announcement regarding the Amazon advertising surcharge lawsuit.
If you purchased advertisements on Amazon through its bidding process, you may have been impacted by actions discussed in this complaint.
Additionally, the FTC has alleged that Amazon not only made use of these secret surcharges, but made active attempts to deceive advertising customers by “giving false or misleading answers to” customers who inquired about the increasing costs of advertising. For sellers who are continuing to purchase advertisements from Amazon, documenting the process of bidding and final costs paid may be important to ensure you have not been impacted by these alleged practices.
Amazon Response to Allegations
In response to the lawsuit being filed against it, Amazon issued a statement regarding how the company’s advertising processes work and denying allegations that it has misled advertisers. The statement begins with a discussion of the history of advertising on the platform – beginning with a discussion of Amazon’s time before advertising was incorporated into its product search. Amazon then discusses the decision to implement advertising as a means of bringing new and innovative products to customers who would not otherwise be able to find them.
Amazon claims that the current controversy arises from changes it made years ago surrounding its “relevance” based advertising system. Here, advertisements may be shown not because they were the highest bidder, but because it targeted customers the best. Amazon claims that issues surrounding the generalized second-price auction system are overstated and that advertisers bid based on what they are willing to pay, not via a risk calculation of what they are likely to pay.
Part of the controversy is Amazon’s use of a hard and soft reserve system for bids. The hard reserve is the minimum bid that Amazon will allow, while the soft reserve is the price they actually think the advertising slot is worth. According to Amazon, bids were capped at the soft reserve price and that this is still less than most advertisers indicated they were willing to spend on the slot.
Overall, Amazon denies the allegations that this had an impact on the costs reflected to customers, or the overall advertising experience for sellers on the platform. The full response can be read here.
Impact of Amazon Litigation on Sellers
Although we cannot speculate on the result of this case, sellers may want to keep informed on the proceedings as it could have an impact on your business practices. The Amazon Sellers Lawyer team will continue to monitor the progress of the case and will update this blog with any information that sellers need to know.
Contact Amazon Sellers Lawyer Today!
The Amazon Sellers Lawyer team has extensive experience handling direct negotiations with Amazon. Whether we are helping you complete a Plan of Action appeal or are facing off against Amazon’s legal team in arbitration, we are here to help. You can contact our team through our online form to submit a case 24/7, or give us a call directly at 212-256-1109.
About the Author
CJ Rosenbaum, Esq.
CJ Rosenbaum is the founding partner of Amazon Sellers Lawyer. He’s been practicing law since 1995, and since 2016 his firm has focused exclusively on helping Amazon sellers deal with issues like suspensions, intellectual property disputes, and withheld funds.
CJ has written seven books on Amazon seller legal issues, including Amazon Sellers’ Guide to Copyright Law. He has spoken at major industry events like the Prosper Show, Global Sources Summit, and Retail Global. CJ also works with the Amazon Sellers Lawyer team to provide free content for Amazon sellers. This is available through their online blog and YouTube channel, frequently covering major Amazon updates and important topics relevant to the seller space.
Through BrandProtectionAmazon.com, the firm also supports brands in protecting their products. This gives the team the unique opportunity to learn from case wins on both sides of the fence, strengthening protection for both the sellers and brands that Rosenbaum & Segall P.C. represents.