The FTC Is Suing Amazon Over How Sponsored Products Pricing Actually Works
The FTC and 22 state attorneys general sued Amazon on August 31, alleging the company secretly altered how its advertising auctions calculate price for more than seven years, extracting what the complaint calls “tens of billions of dollars” from more than a million brands and sellers. The 181-page complaint was filed in federal court in Seattle. Amazon has publicly and firmly denied wrongdoing.
If you've ever set a Sponsored Products bid and wondered exactly what determined the CPC you actually paid, this lawsuit goes directly at that question, and it's worth understanding both what's alleged and what Amazon says actually happened.
What the FTC Says Amazon Did
For years, Amazon told advertisers, including more than 500,000 small and medium-sized businesses, that Sponsored Products ran on a generalized second-price auction: the winning bidder pays roughly one cent more than the next-highest bid, not their own full bid. That structure gives advertisers a reason to bid confidently, since the system is supposed to protect them from ever paying close to their actual maximum.
The FTC alleges that starting in 2019, Amazon began quietly overriding that outcome. According to the complaint, Amazon added an undisclosed calculation, referred to internally as a “soft reserve price,” computed after the auction had already determined the winner and the natural second-price outcome. If that soft reserve came in higher than the real second price, advertisers were charged the higher number instead. Internal Amazon documents cited in the complaint describe the resulting figure as a “surchargedSecondPrice” containing “a surcharge hidden in it,” and one Amazon senior scientist reportedly described the mechanism as an “invented auction participant representing how much Amazon thinks that particular ad slot is worth.”
The Numbers the FTC Says Show the Shift
The complaint traces a specific trend it argues proves the change happened: the share of Sponsored Products clicks where advertisers ended up paying their own full maximum bid, rather than a competitively set second price, climbed from roughly 4% in 2020 to 30-40% in 2021, then to about 70% in 2022, reaching close to 80% by 2024. FTC Chairman Andrew Ferguson framed the stakes directly: “When one of the world's largest online retailers engages in unfair and deceptive conduct, the impact can be staggering.”
The complaint also makes a specific concealment allegation worth knowing about. It claims Amazon removed a webpage that explicitly described its auction as second-price only after learning of the FTC's investigation in October 2024, and didn't disclose that removal to the FTC until August 26, 2026, just days before the lawsuit was filed.
Amazon's Response
Amazon disputes the lawsuit sharply, calling it “misguided” in its own public statement. Importantly, Amazon has not denied that a reserve pricing mechanism exists. Its defense rests on a different claim: that the reserve price reflects Amazon's own genuine estimate of an ad placement's market value, that reserve pricing is common practice across the digital advertising industry broadly, and that advertisers were never charged more than their own stated maximum bid.
Amazon has also pointed to broader pricing trends it says undercut the FTC's framing. According to the company, average winning Sponsored Products bids fell roughly 50% between 2019 and 2025, and prioritizing ad relevance over simply awarding placements to the highest bidder saved advertisers more than $8 billion from 2021 to 2025. Amazon's statement pushed back specifically on the idea that this case is about consumer harm, arguing its overall pricing approach, including more than $230 in average annual customer savings through deals and Subscribe & Save, contradicts that framing entirely.
Why This Case Is Genuinely Different From Past Amazon Litigation
Most major antitrust and consumer protection actions against Amazon have centered on marketplace structure, how FBA fees interact with Prime eligibility, or how third-party sellers get treated relative to Amazon's own retail arm. This case is narrower and more mechanical: it's specifically about whether the pricing formula behind Sponsored Products worked the way Amazon told advertisers it worked.
That distinction matters for how seriously to take it. If the FTC's version of events holds up in court, it wouldn't just be a marketplace fairness dispute. It would be a specific, provable claim that the auction mechanics themselves didn't match what Amazon disclosed, a more concrete and technical allegation than most of the broader antitrust theories that have circulated around Amazon's marketplace for years.
What You Should Actually Do Right Now
Nothing about this lawsuit changes your Sponsored Products account today, and the allegations remain contested, not proven. But this is a good moment to pull your own historical CPC data and compare your actual cost-per-click against your maximum bid across a meaningful sample of campaigns, particularly around high-volume periods like Prime Day and Black Friday, which the FTC specifically alleges saw more aggressive pricing. If you consistently see actual CPCs landing very close to your max bid rather than meaningfully below it, that's the exact pattern this lawsuit is built around, and it's useful information regardless of how the case resolves.
This is also a reasonable time to revisit how you separate maximum bid from actual paid CPC in your own reporting, since the difference between those two numbers is precisely what this entire case turns on. Litigation like this can take years to resolve and may never result in individual seller compensation even if the FTC prevails, so treat this as a reason to understand your own auction costs more precisely, not as a signal to change your bidding strategy before anything is actually decided in court.
