FTC Sues Amazon Over Alleged $20 B Ad Overcharges, Stock Slides as States Join Lawsuit
The Federal Trade Commission sued Amazon on August 31, alleging it used an undisclosed "soft reserve price" that pushed Sponsored Products advertisers to pay their full winning bid, instead of the promised second-price rate, in roughly 80% of auctions by 2024, up from 30-40% in 2021, extracting as much as $20 billion from advertisers since 2019. Twenty-two states joined the FTC's complaint, which covers more than a million brands and sellers over seven years. Amazon shares fell several percent on the news, and Amazon says it "strongly disagrees" with the allegations, arguing its auction system saved advertisers money.
The Federal Trade Commission sued Amazon on August 31, 2026, alleging the company secretly overcharged advertisers on its Sponsored Products auctions by adding an undisclosed "soft reserve price" that could push winning bidders to pay their full bid rather than the modest second-price amount Amazon had promised. The complaint estimates the scheme extracted as much as $20 billion from advertisers since the practice began in 2019.
According to the FTC, the share of auctions in which advertisers ended up paying their full winning bid, instead of the one cent above the next-highest bid that Amazon had marketed, climbed from 30 to 40 percent in 2021 to about 70 percent in 2022 and roughly 80 percent by 2024. More than one million brands and sellers, over 500,000 of them small and medium-sized businesses, were covered by the seven-year period the suit examines.
Twenty-two state attorneys general joined the FTC's complaint rather than filing lawsuits of their own, a sign regulators see the alleged pricing scheme as a single, coordinated pattern rather than isolated incidents. Amazon has pushed back forcefully, calling the lawsuit "misguided" and saying it "strongly disagrees" with the claims, arguing its auction system saved advertisers money rather than costing them extra.
AMZN shares fell several percent on the news, with reported declines ranging from roughly 2.5% to just over 3% during Monday's session, one of the stock's worst single-day moves in over a month. The advertising business at the center of the complaint has become one of Amazon's largest profit engines, generating tens of billions of dollars in annual revenue, so investors are watching for signs the litigation could pressure that segment's growth or force costly changes to its ad auction mechanics.
The case could take years to resolve, and its outcome may influence how "second-price" ad auctions are regulated across the industry. Analysts will be watching for early signals from discovery, potential settlement talks, and any voluntary changes Amazon could make to its Sponsored Products pricing to reduce its exposure.
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