The Federal Trade Commission and 22 states made new details public Nov. 5 in their lawsuit accusing Amazon of rigging the auctions that set prices for ads on its store. The details come from portions of the complaint that had been blacked out and are now open to view. They allege Amazon quietly marked up what advertisers paid, by as much as 250% on the biggest shopping days.
The case sits in the U.S. District Court for the Western District of Washington. The FTC filed it Aug. 31 with attorneys general from 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. Amazon denies the claims, and none of the allegations has been decided by a judge.
Advertisers are the ones who paid the alleged markups, but the FTC says the cost did not stop with them. Chairman Andrew Ferguson said in the August announcement that the higher costs “were largely passed on to American consumers.” For anyone who shops on Amazon, that means some part of the price on a sponsored product may have carried an ad fee that was higher than the auction said it should be.
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What do the newly public pages say Amazon did?
The FTC says Amazon raised ad prices in secret by up to 50% above the auction result on ordinary days. On major events such as Prime Day and Black Friday, the markup allegedly reached up to 250%. The complaint says that during the 2021 holiday season the average cost per click rose 20%, and some advertisers saw increases of more than 200%.
In 2022, the FTC says, the surcharges added $87 million in revenue worldwide for the holiday season alone. One large food and beverage advertiser allegedly faced increases above 100% during Prime Day 2023, and Amazon staff allegedly acknowledged internally that the increases were “destroying campaign performance.”
Why do these auctions matter to shoppers?
Sponsored Products are the promoted listings that appear in Amazon search results, and the complaint is built around them. A seller bids to have a product shown near the top, and the FTC says the price of winning that spot was inflated without notice. A seller facing a larger ad bill can raise the product price, cut the ad budget or accept thinner margins, and the FTC’s position is that much of the cost landed on buyers.
What the Nov. 5 release adds is detail: dates, percentages and internal remarks that stayed blacked out in the first public version of the complaint.
Was there a revenue target behind it?
The newly public pages say there was. The FTC alleges that in 2023 Amazon executives went looking for about $40 million in extra revenue to meet corporate targets. The head of Amazon Ads allegedly wrote that he wanted to “pull out all of the stops” to close the gaps.
When advertisers asked whether something had changed in the auction, the FTC says Amazon told them the higher prices reflected more competition. One account manager allegedly wrote that it was “not a bug, or a change in auction style.” The FTC’s position is that the answers were false or misleading.
How does the original lawsuit describe the auction?
The August complaint says Amazon told advertisers it ran generalized second-price auctions, where the winner pays one cent more than the next-highest bid. In practice, the FTC alleges, Amazon charged advertisers in its Sponsored Products ads their own winning bid about 80% of the time, which turned the auction into a first-price one. The commission voted 2-0 to authorize the suit.
The complaint also alleges that beginning in 2019 Amazon added an undisclosed surcharge it called a “soft reserve price.” It further alleges Amazon used an “invented auction participant” and “proxy 2nd price” bids that work like shill bids. The FTC says the scheme ran for more than seven years, reached more than one million brands and sellers, including over 500,000 small and medium-sized businesses, and likely took in “tens of billions of dollars.”
New Jersey Attorney General Jennifer Davenport, one of the officials who sued, said Amazon “promised competitive auctions to set prices and then quietly replaced those results.” Christopher Peterson, acting director of the state’s Division of Consumer Affairs, said New Jersey businesses “have been systemically cheated.” New Jersey is suing under its Consumer Fraud Act, while the FTC cites Section 5(a) of the FTC Act.
What does Amazon say?
Amazon disputes the FTC’s account. In a statement reported by HomePage News on Sept. 1, the company said the FTC’s claim rests on a “fundamental misunderstanding of how advertisers behave,” and that advertisers adjust bids based on real outcomes rather than auction mechanics. Amazon also said an advertiser never pays more than its bid and that no harm to consumers occurred.
The FTC’s Nov. 5 release does not give a trial date or any next court deadline, and neither the August announcement nor the November one says what penalties or other relief the agencies want. Until the court rules, the surcharge claims are the government’s allegations, and Amazon’s denial is the company’s answer to them.
If ad fees can be padded behind the scenes, where else is a fixed income being quietly drained?
The FTC’s claim is that hidden markups on Amazon ads were largely passed on to shoppers, one sponsored product at a time. Nobody can see an ad surcharge on a receipt, and the same is true of many small leaks in a retiree’s budget that go unnoticed for years.
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
