Karmactive Team
When you pay for an Amazon advertisement, how do you know the price reflects a real auction? The FTC is claiming Amazon secretly altered its advertising system to charge sellers more than the advertised auction mechanism would have produced.
On August 31, 2026, the FTC and 22 states filed a lawsuit against Amazon. The complaint alleges that more than one million brands and sellers were affected, including over 500,000 small and medium-sized businesses. The FTC estimates the scheme extracted tens of billions of dollars from advertisers.
Here’s how normal advertising auctions work: In a second-price auction, you bid what represents your maximum payment. You end up paying only enough to beat the next-highest bid. This system means the winner pays according to auction rules rather than simply their maximum bid.
The FTC says Amazon changed the rules without disclosing it to advertisers. Starting around 2019, Amazon allegedly introduced what it called internally a “soft reserve price.” This additional pricing mechanism could raise what advertisers paid beyond what the FTC says a genuine auction would have produced. The FTC alleges advertisers were led to believe they were in one system but encountered another.
The complaint doesn’t establish intentional deception regarding this specific mechanism, but rather that the actual system didn’t match the transparent, second-price auction Amazon described.
Amazon disputes the entire case. The company says the FTC’s case fails to prove consumer prices increased. Amazon presents performance data: average cost-per-click for Sponsored Products stayed flat from 2019 to 2024 after adjusting for inflation. Conversion rates increased by more than 24% from 2021 to 2025. Advertisers allegedly gained over $8 billion from 2021 to 2025 through Amazon’s relevance-focused advertising approach. Average winning Sponsored Products bids dropped 50% from 2019 to 2025.
Amazon’s defense centers on advertiser results. The company insists advertisers never pay beyond their maximum bid. The advertising console has stated since 2018 that a bid represents the maximum charge possible.
This distinction matters because the FTC lawsuit doesn’t claim Amazon charged advertisers above their bids. The FTC complaint questions whether the auction mechanism matched what Amazon claimed. According to the FTC’s allegations, the “soft reserve” sits between the second-highest bid and an advertiser’s maximum—extracting money from that gap. This is a story Karmactive has covered related to Amazon’s previous FTC settlement on subscription traps.
The lawsuit remains pending. Nothing has been proven. The FTC alleges misconduct. Amazon denies it. What happens depends on evidence, legal arguments, and what a judge or jury ultimately decides. Readers interested in Amazon’s legal challenges may also find context in previous class action litigation.
