FTC and 22 states sue Amazon over alleged $20 billion ad‑auction overcharges

The Federal Trade Commission and a bipartisan coalition of 22 state attorneys general filed a complaint in the U.S. District Court for the Western District of Washington on Sept. 1, 2026, alleging that Amazon systematically overcharged its advertising customers by more than $20 billion.

Details of the complaint

The lawsuit states that Amazon’s ad‑auction platform employed a hidden “soft reserve price” surcharge that overrode the price that would have emerged from a competitive second‑price auction. Advertisers were therefore charged more than the auction‑determined price on virtually every click.

“Based on numerous internal documents describing its ‘hidden’ ‘surcharges,’ Amazon’s scheme has likely illegally extracted over $20 billion from its unwitting advertising customers,” the complaint says.

The complaint further alleges that Amazon “secretly and systematically overcharged its approximately 1.2 million advertising customers by manipulating the ‘auctions’ that it uses to set the price of ads on its platform.”

The FTC obtained internal documents showing Amazon “added an undisclosed surcharge that it internally calls a ‘soft reserve price,’ causing advertisers to pay more than the price determined by the auction.”

According to the filing, the practice was applied to “billions of rigged auctions,” with hidden surcharges imposed “almost every time a shopper clicks on an advertisement.”

Scope and scale of the alleged scheme

The complaint covers the period from Jan. 1, 2019, through Dec. 31, 2025. During that window, the FTC alleges that roughly 1.2 million advertisers were affected. The alleged overcharges total more than $20 billion, a figure that the complaint describes as a “likely illegal extraction” from advertisers.

The investigation began in 2024, when the FTC opened a probe into Amazon’s ad‑auction practices. Over the subsequent two years, the agency gathered internal documents, emails, and system logs that allegedly demonstrate the hidden reserve‑price mechanism.

While the complaint provides a total overcharge estimate, it does not break down the amount by year or by advertiser segment. The FTC also has not disclosed the precise methodology used to arrive at the $20 billion figure.

Amazon’s size and financial backdrop

Amazon.com, Inc. (NASDAQ: AMZN) remains one of the world’s largest retailers and a dominant player in digital advertising. The company is headquartered in Seattle, Washington, and is led by CEO Andy Jassy.

According to its most recent Form 10‑Q filed July 31, 2026, Amazon reported $382.125 billion in revenue for the six‑month period ending June 30, 2026, and net income of $135.281 billion for the same period. Total assets stood at $1.095689 trillion, and shareholders’ equity was $551.62 billion. The filing listed 10.783 billion shares outstanding.

Amazon employs roughly 230,800 people worldwide, according to the SEC filing. The company’s scale gives the alleged $20 billion overcharge a material dimension relative to its advertising business, which the firm does not break out separately in its public filings.

Potential implications and next steps

The complaint seeks injunctive relief to stop the alleged practice, restitution for affected advertisers, and civil penalties. The FTC can also pursue a civil fine of up to 10 percent of the overcharged amount, which could translate into a penalty of up to $2 billion if the agency’s $20 billion estimate holds.

State attorneys general may bring parallel actions under state consumer‑protection statutes, potentially adding further fines or requiring changes to Amazon’s ad‑technology architecture.

Amazon has not yet commented publicly on the filing. The company’s standard response to FTC actions is to deny wrongdoing while cooperating with the investigation, but no official statement was available at the time of writing.

For advertisers, the lawsuit raises the prospect of refunds or credits for past spend, though the mechanics of any settlement remain unclear. Larger brands that allocate significant budgets to Amazon’s ad platform may be more likely to pursue individual claims, while smaller advertisers could rely on a collective settlement.

Uncertainties remain. The FTC has not disclosed how it calculated the $20 billion figure, nor has it provided a breakdown of the “soft reserve price” algorithm. Amazon’s internal pricing models are proprietary, and the company may argue that the surcharge reflects legitimate cost‑recovery or value‑added services.

The case also adds to a growing wave of antitrust and consumer‑protection scrutiny of big‑tech platforms. Earlier this year, the FTC secured a $200 million judgment against a credit‑repair scheme targeting veterans, and regulators have been probing other aspects of Amazon’s marketplace practices.

Regardless of the outcome, the filing underscores the regulatory risk inherent in Amazon’s advertising arm, which has become a critical revenue stream as the company diversifies beyond retail.

Key figures at a glance

These figures provide a snapshot of the alleged financial impact of the hidden surcharge alongside Amazon’s broader financial health.

What remains unknown

• The exact algorithmic parameters of the “soft reserve price” and how they were applied to individual auctions.
• The breakdown of the $20 billion estimate by year, ad format, or advertiser size.
• Whether Amazon will settle, contest the case in court, or negotiate a consent decree.
• The timeline for any potential restitution to advertisers, especially smaller businesses that may lack resources to pursue separate claims.

As the case proceeds, regulators, advertisers, and investors will watch closely for any precedent‑setting outcomes that could reshape the economics of digital advertising on Amazon’s platform.