Amazon is facing a lawsuit from the US Federal Trade Commission (FTC) and attorneys general across 22 states over hidden price hikes.
Filed in the US District Court for the Western District of Washington, the complaint claims Amazon quietly increased the rates charged to more than a million brands and sellers advertising on its site over seven years, pulling in an estimated tens of billions of dollars from customers left in the dark about the shift.
More than 500,000 small and medium-sized businesses are said to be among those affected.
The states involved include California, New York, Florida, and Illinois.
FTC chairman Andrew N Ferguson said: “Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers.”
Advertisers competed for Sponsored Products, Sponsored Brands and Display Ads placements next to Amazon search listings, with the top-ranked bidder for each keyword securing the spot.
Amazon had told advertisers it ran “second price” auctions – where the winner pays one cent above the runner-up bid, a format known industry-wide as generalised second-price.
The complaint alleges that, instead, Sponsored Products advertisers were charged their full winning bid roughly 80% of the time, effectively turning it into an undisclosed first-price system.
According to the complaint, Amazon changed its auction mechanics from 2019 without warning, adding a hidden fee internally termed a “soft reserve price”, alongside what internal records call an “invented auction participant” used to push prices higher.
The share of Sponsored Products advertisers paying their full bid is said to have climbed from 30%-40% in 2021 to 70% in 2022 and around 80% by 2024.
Citing internal documents, the complaint quotes the Amazon Ads executive as saying the price advertisers pay “isn't set by an actual bidder” but is a “proxy second price that we calculate”.
It further alleges Amazon misled advertisers who asked about the change directly, with one internal note warning that disclosure risked “irrevocable damage to advertiser trust” and a “downward spiral” in revenue.
The company has denied any wrongdoing, saying its advertising policies are designed to show shoppers the most relevant ads.
Amazon added that the average cost per click paid by advertisers stayed flat between 2019 and 2024, while sales generated from those clicks increased.
"Amazon's approach to pricing contradicts any suggestion of consumer harm," the company said.
"We provide customers the lowest prices every day across the widest selection of products, and work to ensure our retail and grocery prices meet or beat those offered by other retailers."
The company has faced other recent US litigation, including a proposed class action last month over sustainability claims on seafood sold on its platform.
