FTC and 22 States Sue Amazon on August 31, 2026 Over a Secret Ad Auction Surcharge — the Complaint Alleges Roughly $20 Billion Taken From About 1.2 Million Advertisers by Adding an Undisclosed "Soft Reserve" After the Second-Price Auction Was Computed
The Federal Trade Commission and 22 state attorneys general filed suit against Amazon on August 31, 2026 in the U.S. District Court for the Western District of Washington, case number 2:26-cv-03097. The complaint alleges that Amazon told advertisers its Sponsored Ads ran as a second-price auction — you pay slightly more than the next-highest bid — while quietly inserting an undisclosed markup after the auction price was computed, capped only by the advertiser's own winning bid. Internally the mechanism was called a "soft reserve," later "post-hoc pricing adjustments" and then "performance premium." The FTC estimates the practice extracted more than $20 billion from roughly 1.2 million U.S. advertising customers, over 500,000 of them small and medium-size businesses. Nothing changes in Seller Central or the Ads console today: this is a filed complaint, not a ruling or a policy change, and Amazon says it strongly disagrees. What it does give sellers is a documented explanation for a pattern many have seen in their own data — winning clicks charged at or very near the full bid rather than one cent above the runner-up.
Real-World Impact
The figures in the complaint describe how far the pricing drifted from what advertisers were told to expect. Under the second-price mechanic Amazon marketed, a winning $2.00 bid against a $1.20 runner-up would be charged about $1.21. The complaint alleges that by 2024, 79.1% of clicks were instead charged at the advertiser's own full bid — $2.00 in that example — up from 4% in a five-week sample from late September and October 2020. For Sponsored Brands specifically, the complaint puts the share of winners paying their own full bid at about 50% in 2024. Across all advertisers the FTC estimates the cumulative effect at more than $20 billion.
Key Points
- Filed August 31, 2026 in the U.S. District Court for the Western District of Washington, case number 2:26-cv-03097, by the FTC together with 22 state attorneys general
- Participating states named in the filing: 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
- The complaint covers approximately 1.2 million U.S. advertising customers, including more than 500,000 small and medium-size businesses, and alleges over $20 billion in hidden surcharges
- Alleged mechanism: Amazon computed the generalized second-price cost-per-click, then applied an undisclosed markup on top of it, bounded only by the advertiser's own winning bid — which in practice converts a second-price auction into something close to a first-price auction
- The complaint states that the share of clicks charged at the advertiser's own full bid rose from 4% over a five-week period in late September and October 2020 to 79.1% by 2024, and that Sponsored Brands winners paid their own bid amount about 50% of the time in 2024
- Internal Amazon documents cited in the complaint refer to the markup as a "soft reserve" and as "post-hoc pricing adjustments," and the complaint alleges "performance premium" was selected as the replacement term in July 2024
- The alleged conduct is described as running from late 2018 through the filing date, tied to a change in auction rules that took effect in 2019
- Relief sought: a permanent injunction under Section 13(b) of the FTC Act, plus restitution, refunds, disgorgement, civil penalties and attorneys' fees under the accompanying state statutes
- Amazon disputes the case, saying the FTC "wants the public to believe this case is about higher prices for consumers. It is not," and stating that inflation-adjusted cost-per-click was flat from 2019 to 2024, that conversion rates rose more than 24%, and that advertisers saved more than $8 billion from 2021 to 2025 because auctions rank on relevance rather than bid alone
- This is a complaint at the pleading stage — no court has ruled, no refunds have been ordered, and no billing or campaign settings change as a result of the filing
What You Should Do Now
- 1Do not change campaign settings in response to the filing — nothing about bidding, billing or eligibility changes because a complaint was filed, and there is no action Amazon requires of you
- 2Pull your own historical Sponsored Products and Sponsored Brands CPC data back to 2019 and export it now, so you have your own records if a claims or restitution process is established later
- 3Compare your average CPC against your average bid by campaign — the ratio is the metric the complaint centers on, and knowing your own number is more useful than the aggregate figures
- 4Treat any email, text or call offering to file a claim on your behalf as suspect; at this stage there is no claims process, and the case is at the pleading stage in the Western District of Washington
- 5Keep bid strategy grounded in your actual measured ACOS rather than in an assumed second-price discount, since the complaint alleges that discount has largely not been there since 2024
- 6Watch the docket for Amazon's response and any motion to dismiss before drawing conclusions — none of the allegations have been tested in court