The Federal Trade Commission and 22 state attorneys general sued Amazon on 31 August 2026 in the U.S. District Court for the Western District of Washington, alleging that the company manipulated the auctions that set prices for its Sponsored Products, Sponsored Brands and Sponsored Display advertising. The complaint alleges the conduct likely extracted over $20 billion from approximately 1.2 million advertising customers, including more than 500,000 small and medium businesses (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026); Source: cnbc.com). The case is docketed as No. 2:26-cv-03097; the complaint runs 181 pages and is publicly filed in redacted form, with dollar amounts, surcharge rates and certain paragraphs withheld (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026)).
Infobox
| Field | Value |
|---|---|
| Plaintiffs | Federal Trade Commission; 22 state attorneys general |
| Defendant | Amazon.com, Inc. |
| Court | U.S. District Court, W.D. Washington |
| Filed | 31 August 2026 |
| Status | Active |
| Case number | 2:26-cv-03097 |
| Complaint | 181-page complaint, Document 1 |
| Parallel case | Texas Attorney General Ken Paxton, separate similar case filed the same day |
Claims
The core allegation concerns the mechanism of the auction rather than its outcome. Amazon described the auction to advertisers as a generalized second-price auction, in which bidders are ranked by a combination of bid and relevance to the shopper's query and the winner pays the minimum needed to beat the second-place bid. The complaint alleges that after running that auction Amazon "secretly replaces the GSP auction price with a higher 'soft reserve' price," and quotes an Amazon senior scientist describing the soft reserve as "an invented auction participant representing how much Amazon thinks that particular ad slot is worth" (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026); Source: cnbc.com) (Source: qz.com). The Senior Vice President in charge of Amazon Ads is quoted internally saying that in Amazon's auctions "the second price isn't set by an actual bidder, but rather by" Amazon, as a "proxy 2nd price that we calculate" (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026)).
Since 2022 the primary pricing method for Sponsored Products surcharges has been a system built on Amazon's estimate of ordered product sales ("eOPS Based Pricing"), whose output is further constrained so it does not exceed the winning bid. The share of Sponsored Products clicks priced at the winning bid rather than the second price — the "first-price rate" — rose to between 30% and 40% in 2021 and to 70% in 2022 (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026)).
The complaint pleads five counts under Section 5(a) of the FTC Act — misrepresentations, deceptive auction manipulation, concealment, unfair omissions and unfair billing practices — with the plaintiff states pleading parallel counts under their own consumer-protection statutes through Count XLVIII. The prayer seeks a permanent injunction, monetary relief, and for the states civil penalties, restitution, disgorgement and forfeitures (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026)).
Contemporaneous coverage dated the conduct variously to 2018 and 2019. The complaint supports both because it separates decision from implementation: Amazon "determined in late 2018 that it was no longer satisfied with the prices resulting from its competitive advertising auctions" (paragraph 3), "in late 2018 and early 2019, Amazon began secretly overriding the CPCs set by the second price auction results" (paragraph 48), and the systematic overcharging is dated from 2019 (paragraph 1) (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026); Source: finance.yahoo.com) (Source: cnbc.com).
FTC Chairman Andrew N. Ferguson said "Amazon has millions of advertising customers who were misled into paying significantly higher prices," adding that "these higher costs were largely passed on to American consumers." The Commission vote authorizing staff to file was 2-0. The FTC also gives the first-price rate as reaching approximately 80% in 2024, beyond the 30–40% (2021) and 70% (2022) figures in the public complaint text (Source: ftc.gov).
Amazon's response
Amazon called the suit "misguided," said it "fundamentally misunderstands how advertisers operate," and said its auction systems delivered $8 billion in savings to advertisers between 2021 and 2025 (Source: cnbc.com). Its same-day post sets out that position in full (Source: aboutamazon.com).
Amazon does not dispute the existence of the reserve prices. It describes two: a "hard reserve," the minimum a bid must surpass to enter an auction, which it says covers its costs; and a "soft reserve," "a real-time minimum value that seeks to better reflect what each placement is actually worth." Its account of the pricing rule is that where a winning bid exceeds both reserves the advertiser pays the soft reserve, and where it exceeds the hard reserve but not the soft reserve the advertiser wins and pays its own bid, so "in no scenario does an advertiser pay more than their bid." It dates the introduction of soft reserves to the period after machine-learning relevance models — tested from 2014 and in use across Store advertising by 2019 — reduced winning bids to the point that "premium placements in our Store were being undervalued," and states that reserves "are common across the industry."
On harm, Amazon argues the complaint identifies none. It says the FTC "cites no evidence of consumer price increases," that consumers are mentioned "only a handful of times" in over 150 pages, that the damages model assumes no pass-through to consumers and that the proposed redress goes to advertisers rather than shoppers. On advertiser harm it reports that the average cost-per-click for Sponsored Products search ads was flat in inflation-adjusted terms from 2019 through 2024 while conversion rates rose over 24% between 2021 and 2025; that average winning bids fell 50% between 2019 and 2024 (stated as 2019–2025 in its summary list); and that approximately 92% of selected Sponsored Products ads in 2024 were not the highest bid, with the mean winning bid ranking about 128th by amount. It projects that in 2026 relevance-weighted ranking will deliver advertisers at least 58% higher sales and at least 46% better return on ad spend than bid-ranked selection (Source: aboutamazon.com).
Its central rebuttal to the deception theory is behavioral: "advertisers adjust bids based on real-world outcomes, not descriptions of auction mechanics." It reports that from 2019 to 2024, 80% of bid changes on clicked Sponsored Products search ads occurred within one day of a prior change, and cites a study in which competitors' average bids on keywords fell about 83%, from $15.96 to $2.74, after one advertiser stopped bidding on them. It argues advertisers could not incorporate reserve prices into strategy in any case because reserves "are determined in real time and aren't predictable in advance by anyone, including Amazon or the advertiser." On the documentary record it says the FTC reviewed approximately 1.5 million pages spanning six years and "leans on a handful of simplified communications," and it acknowledges the narrower question of "whether we should have improved our communication with advertisers." It attributes the FTC's motivation to seeking "a substantial monetary victory" (Source: aboutamazon.com).
Relation to algorithmic-pricing enforcement
The case turns on a discrepancy between the pricing mechanism a platform describes to its customers and the one its code implements, a pattern also at issue in the enforcement actions treated at Algorithmic Pricing and Antitrust and Surveillance Pricing. What distinguishes it is that the alleged concealment is of a parameter inside an automated auction rather than of the data inputs feeding a price, so the claim is one of deception about mechanism rather than of coordination or discrimination. The complaint itself uses the framing, describing reserve-pricing mechanisms that "override the auction's competitively determined second-price outcome and impose higher, algorithmically generated prices" (FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026)).
Relationships
- instance-of: Algorithmic Pricing and Antitrust — enforcement against an automated pricing mechanism.
- related: Surveillance Pricing — adjacent enforcement theory on automated price-setting.
- litigates: Federal Trade Commission (FTC) — the lead plaintiff.
- related: Amazon — the defendant.
- depends-on: FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026) — the operative pleading.
- related: Amazon v. Perplexity AI — separate Amazon litigation concerning automated agents.
Provenance
First built from three secondary accounts published 31 August 2026 and revised on 2 September 2026 against the complaint itself, summarized at FTC and 22 States v. Amazon — Complaint (advertising auctions, August 2026) (ftc.gov). The 2018-versus-2019 discrepancy is resolved above. The publicly filed complaint is redacted: dollar amounts, surcharge rates and surcharge-constraint percentages, revenue figures and paragraphs 238-240 and 242 are withheld, so the average surcharge rate and the peak-day rate are not on the public record.