<p class="wp-block-paragraph">The Federal Trade Commission (FTC) and a bipartisan coalition of 22 states filed a lawsuit against Amazon on August 28, 2026, alleging that the company misled advertisers over the past seven years by imposing "hidden surcharges."</p>
<p class="wp-block-paragraph">The complaint, filed in the Western District of Washington, where Amazon's headquarters is located, claims that Amazon inflated the prices that approximately 1.2 million advertising customers were required to pay for placing ads on its shopping platform through its advertising auction process.</p>
<p class="wp-block-paragraph">In a typical generalized-second-price auction, the winning bidder pays the amount of the second-highest bid instead of their own bid. The lawsuit alleges that Amazon misled its advertisers by stating that the second-price model was used to determine auction prices when, in fact, prices were inflated with a hidden surcharge.</p>
<p class="wp-block-paragraph">In 2019, Amazon reportedly changed its auction rules to include an undisclosed surcharge that advertisers would need to pay.</p>
<p class="wp-block-paragraph">FTC Chairman Andrew Ferguson stated, "This bait and switch betrayed advertisers’ trust and extracted billions of dollars at their expense. Amazon imposed this elaborate scheme on Americans for a simple reason: it wanted more money." The plaintiffs estimate that more than $20 billion was "illegally extracted" from Amazon's advertising customers.</p>
<p class="wp-block-paragraph">Amazon, which is the third-largest digital advertising business globally, generated over $68 billion in advertising revenue last year, primarily from ad sales for sponsored products.</p>
<p class="wp-block-paragraph">The lawsuit was joined by the attorneys general of 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. Texas filed a similar lawsuit independently.</p>
<p class="wp-block-paragraph">In response to the lawsuit, Amazon described the legal action as "misguided" and disputed the facts of the case. The company stated, "The FTC’s claim fundamentally misunderstands how advertisers operate. Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics. Even accepting the FTC’s flawed premise that advertisers do not adjust bids, we estimate they saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone."</p>
<p class="wp-block-paragraph">This lawsuit is the latest action taken by the FTC against Amazon. The company is set to go to trial in February 2027 as part of a broader federal antitrust case led by the FTC and 17 states, which accuses Amazon of undermining competition by inflating prices and exerting its "monopoly power" over third-party sellers.</p>