FTC sues Amazon over hidden ad auction fee

If you have run Sponsored Products at any point since 2019, the price you paid per click may not have been set by the advertiser who bid just below you. That is the core of a complaint filed by the Federal Trade Commission and 22 state attorneys general against Amazon, and it is the reason this case matters to a seller rather than only to a competition lawyer. The allegation is not that Amazon charged too much. It is that Amazon changed who was setting the price, and did not say so.

These are allegations. No court has found anything, no remedy has been ordered, and Amazon rejects the claims.

What is actually alleged

Amazon’s ad auctions, including Sponsored Product Ads, run as a second-price auction, described in the complaint as one “where winners pay one cent more” than the next bid down. That design is the reason advertisers have historically been comfortable bidding their true maximum: if you bid two euros and the next advertiser bid eighty cents, you pay eighty-one cents, not two euros. The runner-up sets your price, and the runner-up is another advertiser.

The complaint alleges that in 2019 Amazon “altered its rules” to insert something the filing describes, quoting an internal Amazon document, as a “hidden” surcharge, also referred to internally at Amazon as a “soft reserve price”. A reserve price is a floor. If a floor sits inside a second-price auction and the floor is above the runner-up’s bid, then the floor sets your price, not the runner-up. The auction still looks like a second-price auction from the outside. The second price is simply no longer coming from a rival bidder.

That is the whole mechanism, and it is worth being precise about what it does and does not imply. A reserve price is not by itself improper: publishers set floors, and any auction house may decline to sell below a number. The allegation here is about disclosure and about characterisation, that advertisers were told they were competing against each other when a share of the price was being set by the house.

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The scale claimed, and its limits

The FTC claims the practice affected “over 1 million brands” and ran “over seven years”, while delivering “tens of billions in revenue” to Amazon’s own business. Search advertising, including Sponsored Product Ads, still makes up the lion’s share of an Amazon ads business that “neared $70 billion in revenue in 2025”.

Read those numbers carefully, because they are doing different jobs. The seventy billion is the size of the whole ads business in one year, not the size of the surcharge. The “tens of billions” is the regulator’s estimate of what the practice delivered across seven years, and it is an allegation in a pleading rather than an audited figure. No total amount for the surcharge itself has been published, and no per-advertiser figure has been published either. If someone tells you this case is worth a specific number to sellers, that number is not in the complaint.

Amazon’s answer, and what it does not answer

Amazon has responded, and its response is built on two figures: that cost per click for Sponsored Product Ads “were flat when adjusted for inflation between 2019 and 2024”, and that “conversion rates, a closely watched performance metric, rose 24%”. Amazon’s position is summarised in its own words: “The FTC’s claim fundamentally misunderstands how advertisers operate.”

Both figures are Amazon’s, drawn from a period Amazon selected, and both are aggregates across the entire advertiser base. Flat inflation-adjusted cost per click across millions of advertisers is compatible with a great many things happening underneath, including some advertisers paying a floor while others never came near it. A rising conversion rate is a statement about the quality of the traffic, not about how the price of that traffic was determined. Neither number is a denial that a reserve price existed. They are an argument that advertisers were not worse off overall, which is a different claim from the one the complaint makes.

We are not in a position to say which side is right, and nobody reading this should act as though the outcome is known.

The scope question nobody is answering

This is a United States case. The plaintiffs are a US federal regulator and 22 US state attorneys general, and the market figures cited in the complaint are US figures. Nothing published says the same auction rule operated in Amazon’s European marketplaces, and nothing published says it did not. That gap is the single most important thing for a European seller to hold in mind, because it determines whether this is your problem or someone else’s.

Our position is that you should treat it as an open question rather than resolving it in either direction. Amazon’s advertising platform is built and operated centrally, which makes a US-only auction rule less likely on the face of it, but “less likely” is not evidence and a pleading about one market is not a finding about another. If a European seller acts as though a hidden floor is confirmed in Germany, they are asserting something no document supports. If they act as though Europe is definitely unaffected, they are assuming a separation that has not been described either.

What a bid floor does to bidding, in plain terms

The reason a hidden floor matters more than a fee increase of the same size is that it breaks the logic advertisers were taught to use.

In a clean second-price auction, bidding your true maximum is the correct move and it is safe, because you never pay your maximum unless someone else bids nearly that much. That property is the whole reason the format is used, and it is why every guide to Sponsored Products tells sellers to bid what a click is genuinely worth to them rather than what they hope to pay.

Put a floor in, and the safety goes. Bidding high is still correct when a rival is close behind you. It is no longer safe when the shelf is thin, because in a thin auction the floor, not the rival, decides your price. The advertisers most exposed are therefore the ones in narrow niches with few competitors, which is the opposite of what most sellers assume. Crowded categories protect you from a floor; empty ones expose you to it.

That point holds whether or not the complaint is upheld. Any auction you do not control may contain a floor, so a seller running long-tail keywords with almost no competition should watch realised cost per click against bid on those specific terms, because that is where a gap would show up first.

What a seller does differently on Monday morning

Nothing changes inside Seller Central or the ad console this week. There is no setting to check, no box to untick, no filing to make. Anyone selling you urgency on this story is selling you something else.

What does change is how much weight your own historical cost per click can carry. Three things are worth doing while the case is live.

• Pull your own Sponsored Products cost per click by campaign, as far back as your data goes, and keep a copy outside Amazon’s reporting. If a remedy or a claims process ever arrives, your own records are the only evidence you control.
• Stop treating an unexplained gap between your bid and your realised cost per click as your own targeting problem. It may be, and usually is. But the complaint establishes that a house-set floor is at least a live question, which is a reason to measure rather than to assume.
• Review any automated bidding rule that assumes a pure second-price auction. Rules built on the logic “bid high, pay the runner-up” carry more risk than their authors thought if a floor can sit above the runner-up.

The frame that matters longer than the case

The reason to spend attention on this is not the litigation, which will take years and may settle into something narrow. It is that Amazon’s advertising business is now large enough, and central enough to how products are found, that its pricing mechanics are a cost of goods for European sellers as much as fulfilment fees are. Sellers audit their FBA fees line by line. Very few audit the mechanism by which their ad spend converts into a price.

That asymmetry is the actual story. A seller can read a fee schedule. A seller cannot read an auction. When the auction is also owned by the retailer you compete with, the only defence available is your own measurement, kept in your own system, over a long enough window to see a pattern.

The three-line version

• If you run the ads: your realised cost per click on thin, low-competition keywords is the number to watch, and keep your own copy of it outside Amazon’s reporting.
• If you have just inherited the ad budget: the gap to name is that nobody in your business can currently explain how a bid becomes a price.
• If you sign the budget: nothing to decide this week, and no claim, refund or figure exists to chase. Anyone offering you one is inventing it.

Sources

• Retail Dive: https://www.retaildive.com/news/amazon-hid-surcharges-ad-auctions-alleges-ftc-complaint/829294/