FTC and 22 States Sue Amazon Over a $20bn Ad-Auction 'Surcharge' Scheme
The FTC and 22 states have sued Amazon, alleging it quietly rigged its ad auctions with hidden surcharges since 2018 — overcharging around 1.2 million advertisers by roughly $20 billion. Amazon says the claim 'mischaracterises' how its system works.
What the Lawsuit Alleges
On 31 August 2026, the Federal Trade Commission and attorneys general from 22 states filed suit against Amazon in the US District Court for the Western District of Washington. The core claim: that since late 2018, Amazon manipulated its 'second-price' ad auctions by inserting hidden surcharges.
According to the complaint, Amazon inserted an 'invented auction participant' representing what Amazon itself thought a slot was worth, overriding legitimate results and inflating the price advertisers paid. The alleged haul is around $20 billion, taken from roughly 1.2 million ad customers — many of them small-business sellers.
Amazon's Defence
Amazon denies wrongdoing, saying the FTC's claim "fundamentally mischaracterizes how its system works." The company argues it optimises for ad relevance, not just the highest bid, noting that 92% of winning ads did not come from the top bidder and that conversion rates rose 24% between 2021 and 2025.
That defence matters for the whole retail-media industry. If relevance-weighted auctions are legitimate optimisation, much of modern ad tech is fine; if undisclosed price adjustments cross a line, a lot of 'black box' auction logic suddenly looks legally exposed.
Why Marketers Should Care
Retail media is the fastest-growing slice of advertising, and Amazon is its centre of gravity. A case alleging that the auction itself was quietly tilted strikes at the one thing that makes programmatic buying work: trust that you're paying a fair, mechanically determined price.
Even before any verdict, expect advertisers to demand more transparency — clearer reporting on how winners and prices are set, and independent verification. The era of taking a walled garden's auction on faith is ending, and this suit will accelerate it.
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Our take: whatever the courts decide, the practical lesson is the same — audit where your money goes. If a platform can't or won't explain how a slot's price is set, treat that opacity as a cost and diversify accordingly.
This also strengthens the case for owned and first-party channels. When the biggest auctions are under legal scrutiny, the media you control — your email list, your site, your loyalty base — looks less like a nice-to-have and more like risk management.
Quick FAQ
What is the FTC accusing Amazon of?
Manipulating its second-price ad auctions with hidden surcharges since late 2018 — using an 'invented' bid to inflate prices — allegedly overcharging about 1.2 million advertisers by roughly $20 billion.
How has Amazon responded?
It denies wrongdoing, saying the claim mischaracterises its system, that it optimises for relevance over price, and that 92% of winning ads did not come from the highest bidder.
Why does it matter for advertisers?
It targets trust in the auction itself — the mechanism underpinning retail media and programmatic buying — and is likely to accelerate demands for auction transparency and independent verification.
This case cuts to the heart of programmatic: are you actually paying a fair, machine-set price, or a number someone nudged behind the curtain? Regardless of the verdict, the takeaway for marketers is to stop taking walled-garden auctions on faith — demand transparency, verify independently, and keep investing in the media you actually own. — Daniel Nikolla, Founder of Merx Marketing
When the biggest ad auctions are under legal scrutiny, transparency stops being a nice-to-have — and the media you own becomes risk management.
Do you actually know how your biggest ad platform sets the price you pay — or are you taking the auction on faith?
If you would like to know more about this topic, please contact us on danieln@merxmarketing.co.uk
Sources: CNBC, CNN, GeekWire, Business Standard, Adweek.
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Written by Daniel Nikolla, Founder of Merx Marketing Ltd and Marketing Minute
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