FTC and 22 states sue Amazon over a secret advertising surcharge scheme

In brief

On 3 September 2026, the FTC and 22 states filed a complaint against Amazon. The allegations concern a secret advertising surcharge system. Chairman Andrew N. Ferguson is cited in the documents. These are allegations and not a judgment. The filing asserts that the company’s advertising auctions operated differently from the second-price model that was communicated to participants. Instead of charging only a small increment above the second-highest bid, the system allegedly applied the full winning bid in roughly four out of five instances. This discrepancy is presented as the core of the claimed surcharge scheme. The complaint names more than one million advertisers and more than 500,000 small and medium-sized businesses as having been subject to the practice during the multi-year period under review. In other words, the issue is framed not as an occasional deviation but as a systematic departure from the rules that had been disclosed to advertisers in advance.

How it works

The complaint alleges that Sponsored Products, Sponsored Brands and Sponsored Display auctions were presented as a second-price system (one cent above the second bid) but advertisers were charged the winning bid price approximately 80 % of the time. This practice is alleged to have affected more than one million brands and sellers, including more than 500,000 small and medium-sized businesses, over a period of more than seven years, for an alleged amount of tens of billions. The mechanism described involves auctions that advertisers were told would follow a second-price format, yet the actual billing reportedly defaulted to the highest bid in the large majority of cases. In a true second-price auction the winner pays only a minimal increment above the next competing offer, which is intended to encourage participants to bid their true valuation without fear of overpaying. Here, however, the system is said to have bypassed that safeguard by applying the full winning amount instead. Because the difference between the claimed model and the applied charges accumulated across millions of transactions, the total impact is described as reaching tens of billions. The complaint further states that these additional costs were ultimately passed along the supply chain, affecting pricing for consumers as well as the profitability of the businesses that purchased the ads. This pass-through effect is presented not as an isolated outcome but as a recurring consequence that touched both ends of the marketplace. The same pattern is said to have continued for more than seven years, covering three major advertising formats that together represent a substantial share of Amazon’s sponsored placements. It is important to note that the described practice does not involve altering the visible auction interface itself; rather, the divergence is alleged to have occurred in the background billing process that participants could not directly observe.

What is sourced

The sources indicate that Sponsored Products, Sponsored Brands and Sponsored Display formats were presented as a second-price system but billed at the winning bid price approximately 80 % of the time. More than one million brands and sellers, including more than 500,000 small and medium-sized businesses, are alleged to be affected. Costs are alleged to have been passed on to consumers over more than seven years. The documents emphasize that the discrepancy between the advertised auction rules and the actual charges occurred consistently across the three formats. The scale of participation—more than one million advertisers and more than 500,000 small and medium-sized businesses—underpins the claim that the practice had widespread reach. The complaint links the accumulated charges, described as totaling tens of billions, to higher costs ultimately borne by consumers through elevated product prices. This connection is drawn by tracing how the extra amounts paid by advertisers could translate into broader pricing adjustments further downstream.

Caveats

The figures and allegations come from the filed complaint and may evolve during the judicial process. No final decision has been rendered at this stage. The alleged amounts of tens of billions remain estimates appearing in the FTC documents. Because the case is still at the complaint stage, all numerical references, including the proportion of auctions billed at the winning bid and the overall financial impact, are subject to further scrutiny and potential revision. The involvement of Chairman Andrew N. Ferguson is noted only as a citation within the official filing; no separate statements or interpretations beyond the complaint itself are included here. Readers should therefore treat every quantified claim as an allegation rather than an established fact. It is also worth underscoring that the present text does not attempt to verify or refute any element of the filing; its purpose is limited to summarizing the content already set forth in the documents.

What happens next

The judicial proceedings will follow their course. The parties will be able to present their arguments before the courts. As the case advances, additional evidence may be introduced, and the scope of the allegations could be refined. The court system will determine whether the described auction practices violated applicable laws and, if so, what remedies, if any, are appropriate. Until that process concludes, the claims remain unproven assertions contained in the initial complaint. In this sense the current stage represents only the beginning of a longer sequence of legal steps rather than any conclusive outcome.

Going further

The FTC documents published in August 2026 detail the allegations. Readers can consult the official sources to follow the evolution of the case.

• FTC Press Release
• FTC Complaint PDF
• FTC Legal Library