Complaint for permanent injunction, monetary judgment and other relief, filed 31 August 2026 by the Federal Trade Commission and the attorneys general of 22 states in the United States District Court for the Western District of Washington, Case No. 2:26-cv-03097, Document 1, 181 pages. It is the pleading behind FTC v. Amazon (advertising auctions). The plaintiff states are Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Vermont and Washington. The FTC's Northeast Region attorneys of record are Jonathan W. Platt, Darren H. Lubetzky, Adam K. Hersh, Vikram Jagadish, Jason E. Kornmehl and Ishan Shivakumar.
The publicly filed version is redacted. Dollar amounts, surcharge rates, surcharge-constraint percentages, first-price-rate seed figures, revenue figures, product-category names and certain advertiser names are withheld, as are paragraphs 238–240 and 242 in full; the summary below reports only figures that survive in the public text.
The alleged mechanism
The complaint's opening allegation is that "since 2019, Amazon.com, Inc. has secretly and systematically overcharged its approximately 1.2 million advertising customers by manipulating the 'auctions' that it uses to set the price of ads on its platform." Those customers include "over 500,000 small and medium-size businesses." Three advertising products are named: Sponsored Products, Sponsored Brands and Sponsored Display. Drawing on internal documents describing "hidden" "surcharges," the complaint alleges the scheme "has likely illegally extracted over 20 billion dollars from its unwitting advertising customers."
Since launching advertising auctions in approximately 2012, Amazon has represented that prices are set by generalized second-price auctions — bidders ranked by a combination of bid and relevance to the shopper's query, with the winner paying the minimum needed to beat the second-place bid. The complaint alleges that mechanism was overridden while the representation continued. It quotes the Senior Vice President in charge of Amazon Ads stating internally that in Amazon's auctions "the second price isn't set by an actual bidder, but rather by" Amazon, in the form of a "proxy 2nd price that we calculate."
Internally the process is called a soft reserve pricing system. The complaint draws the distinction from an ordinary reserve price, which is a seller's advance minimum that a buyer must bid to compete: Amazon's soft reserve is "not a minimum amount that an advertiser has to bid to compete"; instead, "after Amazon runs the auction, it secretly replaces the GSP auction price with a higher 'soft reserve' price." Internal documents describe pricing calculated "in two stages" — a generalized second-price auction producing a "GSP CPC," which Amazon then "transforms … to the final CPC" through the soft reserve. Sponsored Products team members internally referred to the practice as "post-hoc pricing adjustments," which have "an element of unfairness" since "[a]dvertisers may not be expecting" them.
From 2022 the primary pricing method for Sponsored Products surcharges is a system built on Amazon's estimate of ordered product sales, "eOPS Based Pricing." Soft reserve prices generated by eOPS are then further modified so they do not exceed the winning bid, which the complaint alleges reduces "the risk that advertisers detect and react negatively to the price increases." The head of Sponsored Products auctions explained in 2021 to the Vice President of Sponsored Products that the surcharge constraint lets Amazon track "how much we've moved away from an auction mechanism."
The complaint characterizes the resulting prices as "algorithmically generated," describing undisclosed reserve-pricing mechanisms that "override the auction's competitively determined second-price outcome and impose higher, algorithmically generated prices that Amazon internally described as the 'fair market' it believed it was entitled to collect." An internal 2021 document titled "Pricing Introduction" gives Amazon's rationale: GSP prices can be "significantly below 'fair market value'" because advertisers bid the maximum they are willing to pay but "end up paying a small fraction of [their] bid."
Concealment and the first-price rate
The complaint alleges deliberate concealment as a design goal. Amazon "designed the soft reserve pricing system so its existence would be imperceptible," with an internal statement that a mark "of a 'good' reserve price is that it simulates a 'natural'" second-price bid. It alleges Amazon "controls and limits the auction data available to customers," internally describing its aggregated price reporting as "opaque," so customers "are unable to verify auction results and how prices are set."
The clearest surviving quantitative trace is the share of clicks priced at the winning bid rather than at the second price — the "first-price rate." After the launch of eOPS Based Pricing it "increased to between 30% and 40% in 2021, and then to 70% in 2022." The complaint alleges continued undisclosed pricing experiments on advertisers, including a large-scale 2023 experiment raising surcharge limits in the United States, after which Amazon determined that affected advertisers "did not react by reducing their bids or their advertising budgets" and rolled the increase out across its US customer base. A 2022 internal chat from a Sponsored Products auction team member is quoted: "we can ask advertisers in interviews to see if/how much they pay attention to FP [first price] rate (subtly, without tipping them off)."
Surcharges are alleged to rise during peak shopping periods — "high velocity events" such as the Christmas season and Prime Day — with Amazon deliberately calibrating them "to drive down advertisers' RoAS to match the advertisers' lower RoAS during normal shopping days." The complaint devotes sections to what it calls cover-ups following cost-per-click spikes: escalations in December 2021, at Prime Day 2023, and a customer escalation in 2024. It also records internal dissent, including employees questioning whether "introducing soft floors" was "the customer-obsessed thing to do," and a warning that a change would push "advertisers to lower bids in many cases, which will likely destabilize the market and likely be a one-way door."
Counts and relief
The FTC pleads five counts under Section 5(a) of the FTC Act, 15 U.S.C. § 45(a):
| Count | Theory | Provision |
|---|---|---|
| I | Misrepresentations — representing generalized second-price auctions while inflating prices above the auction result | § 45(a) deception |
| II | Deceptive auction manipulation — "secretly inserting a fake 'bid' or price after determining the winning bids" | § 45(a) deception |
| III | Concealment — deliberately concealing the inflation from customers known to believe the second-price representation | § 45(a) deception |
| IV | Unfair omissions — failure to disclose adequately, causing substantial unavoidable injury not outweighed by countervailing benefits | § 45(a), (n) unfairness |
| V | Unfair billing practices — charging above the auction-derived price without express informed consent | § 45(a), (n) unfairness |
The plaintiff states plead parallel counts under their own consumer-protection statutes, running through Count XLVIII, each generally realleging the conduct in Counts I–V. The statutes invoked are named per state, from Alaska Statute §§ 45.50.471 et seq. through Wash. Rev. Code § 19.86.020.
The prayer for relief asks the court to enter a permanent injunction against future violations of the FTC Act and the enumerated state laws; to award monetary relief "and other relief within the Court's power to grant"; to award any additional relief the court determines just and proper; and to award the plaintiff states "civil penalties, restitution, disgorgement and/or forfeitures for each violation of their respective state laws, attorneys' fees, costs, and expenses as provided under state law."
Dating
Secondary coverage on the day of filing dated the conduct variously to 2018 and to 2019. The complaint supports both readings because it distinguishes decision from implementation: paragraph 3 states that "Amazon determined in late 2018 that it was no longer satisfied with the prices resulting from its competitive advertising auctions"; paragraph 48 states that "in late 2018 and early 2019, Amazon began secretly overriding the CPCs set by the second price auction results"; and paragraph 1 dates the systematic overcharging from 2019.
Relationships
- supports: FTC v. Amazon (advertising auctions) — the pleading behind the case-tracking page
- instance-of: Algorithmic Pricing and Antitrust — the complaint itself describes the disputed prices as algorithmically generated
- related: Surveillance Pricing — adjacent enforcement theory on automated price-setting
- litigates: Federal Trade Commission (FTC) — lead plaintiff
- related: Amazon — defendant