Antitrust Law Daily Wrap Up, CONSUMER PROECTION NEWS: FTC, states accuse Amazon of inflating online search advertising auctions, (Sep 1, 2026)

By Peter Reap, J.D., LL.M.

The retail giant has for years deceptively increased the prices charged in its search advertising auctions to set prices over what legitimate competition could achieve.

The FTC announced that it has filed a lawsuit, joined by 22 states, against Amazon, alleging that the company engaged in deceptive and unfair practices that secretly inflated prices in its online search advertising auctions. The complaint alleges that, for over seven years, Amazon has covertly and substantially increased the prices that more than one million brands and sellers were required to pay to advertise on its platform. As a result, the complaint alleges that Amazon’s scheme has likely extracted tens of billions of dollars from its unwitting advertising customers (FTC v. Amazon.com Inc., No. 2:26-cv-03097 (W.D. Wash. Aug. 31, 2026)).

Complaint allegations. According to the complaint, since 2019 Amazon has 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. In these auctions, prospective advertisers bid to place Sponsored Product ads, Sponsored Brands ads and Display Ads alongside the results that appear when a consumer searches for a product using a keyword on Amazon’s store. Placements are auctioned to the highest-ranked bidder for each keyword.

Amazon represents, and advertisers believe, that competitive auctions set the prices for advertising on its leading e-commerce website. But, in reality, Amazon overrides and replaces the actual auction results with higher prices set by Amazon to increase its profits.

Amazon has represented since 2012 that its advertising auction prices are set by “second price” auctions that rank participants by a combination of their bid and relevance to shoppers’ searches, and where the winning advertiser only pays the minimum amount necessary (e.g., one cent more) to beat the second-place bidder. But the complaint alleges that Amazon began in 2018 to secretly manipulate its auction results to increase its ad prices. Amazon gave its customers no notice of this change and took affirmative steps to conceal it, while continuing to represent that it operated second price auctions.

This 2018 change occurred when Amazon’s advertising organization (“Amazon Ads”) decided to set and charge customers higher prices for advertising placements itself. As a result, after Amazon runs its ad auctions and determines the winning and second-place bidders, it then replaces the price determined by the auction with a higher price designed to maximize Amazon’s profits and decrease the cost efficiency of its advertisers’ campaigns. As explained internally by Amazon’s Senior Vice President in charge of Amazon Ads, 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.

Further, in another document quoted in the complaint, Amazon acknowledged it uses an “invented auction participant” to increase prices. The complaint alleges that Amazon’s “invented auction participant” and its hidden “proxy 2nd price” bids are essentially shill bids. The complaint also quotes from another Amazon employee, who stated that Amazon’s surcharges enable it to obtain prices “beyond what [can] be achieved through advertiser competition.”

The complaint asserts that Amazon refers to the differences between the actual auction prices and the artificial prices it charges customers as auction "surcharges." Amazon does not disclose that its auction pricing has "a surcharge hidden in it." In fact, Amazon actively conceals this information from its customers through: (1) extensive testing of incremental surcharge increases to assess the risk of detection; (2) adding and fine-tuning design features to its pricing system to help “mask” the surcharges from customers; and (3) responding to customer complaints about suspicious price increases by falsely denying that Amazon played any role in raising the prices. In a redacted chart, the complaint depicts how Amazon has increasingly overcharged its customers while representing to them, across multiple communications channels, that its pricing is set by second price auctions.

Claims. The FTC brings claims for violations of Section 5(a) of the FTC Act and the Attorneys General of the plaintiff 22 states for violations of enumerated state consumer protection laws. Both seek injunctive and other relief.

Plaintiff states. The bipartisan coalition of 22 plaintiff states includes: 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.

Ferguson comments. “When one of the world’s largest online retailers engages in unfair and deceptive conduct, the impact can be staggering,” said Chairman Andrew N. Ferguson. “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers. The FTC under President Trump won’t allow this deception to continue.”

State AG comments. “For years, Amazon has misrepresented how it calculates the cost of advertising on its platform,” said California Attorney General Bonta. “Over the years, Amazon has rigged billions of ad auctions, inflating Amazon’s profits at the expense of Americans who rely on Amazon’s advertising to generate business. I’m proud to stand alongside the FTC and my colleagues across the nation in protecting our small and medium-sized businesses from being taken advantage of by this multi-trillion-dollar company.”

Arizona AG Kris Mayes said: “"Amazon has built one of the largest advertising businesses in the world on the backs of small business owners who trusted the company to play by its own rules. For years, Amazon told advertisers they were bidding in a fair, second-price auction, while secretly adding hidden surcharges that drove prices higher. Many of these increased costs were passed on to Arizonans. Companies that engage in such deceptive practices must be held accountable."

The Case is No. 2:26-cv-03097.

Attorneys: Adam Hersh for the FTC.

Companies: Amazon.com, Inc.

News: ConsumerProtection FederalTradeCommissionNews GCNNews