FTC alleges Amazon illegally made $20 billion by rigging billions of ad auctions

The FTC and states are seeking a permanent injunction to change Amazon’s practices along with civil penalties, restitution, disgorgement, and other monetary relief. Amazon reported $200.6 billion in net sales in Q2 2026 and a net income of $62.6 billion. Amazon yesterday issued a response that said the FTC lawsuit is “misguided.” Amazon did not dispute key claims about the mechanics of its ad auctions, but said its system did not harm consumers or advertisers. “After reviewing approximately 1.5 million pages spanning six years, the FTC leans on a handful of simplified communications to allege a companywide effort to deceive. That is patently false,” Amazon said. It also said “the FTC cherry-picked a small number of materials, such as a few online educational videos and training content that contained older or simplified examples about how our auctions are run.” An FTC press release said that Amazon tells potential ad buyers that it “runs ‘second price’ auctions where the winner of the auction would only pay ‘one cent more than the next highest bidder’ for each successful bid for an advertising keyword.” This “generalized second-price, or GSP auction” is an industry standard for digital ad placements, the FTC said. Amazon has run GSP auctions since 2012, but in 2019, it started adding an undisclosed surcharge that it internally calls a “soft reserve price,” causing advertisers to pay more than the price determined by the auction, the FTC said. The FTC quoted an Amazon senior scientist as explaining that Amazon raises prices by using “an invented auction participant representing how much Amazon thinks that particular ad slot is worth.” An Amazon senior VP in charge of ads said internally that in Amazon’s auctions, “the second price isn’t set by an actual bidder, but rather by” Amazon itself with a “proxy 2nd price that we calculate,” the lawsuit said. On an Amazon Ads auctions webpage last updated in April 2026, Amazon notes that reserve pricing may affect the cost of ads and “help allocate ad space by setting a bid threshold.” The FTC said that while Amazon’s website was updated to disclose reserve pricing, it still “fails to clearly and conspicuously disclose the nature, scope, and extent of Amazon’s secret reserve pricing systems that have been in place since 2018.” Much of Amazon’s public defense relies on an assertion that its ad prices haven’t risen significantly. Amazon said that “from 2019 through 2024, the average cost-per-click to advertisers remained flat when adjusted for inflation.” Since advertisers didn’t have to pay more, there were no price increases to be passed on to consumers, Amazon argued. Amazon also said 92 percent of Sponsored Products ads are not given to the highest bidder because the company selects winners based on a combination of price and relevancy to the keyword search. Amazon claimed that between 2021 and 2025, advertisers saved over $8 billion “as a result of Amazon incorporating ad relevancy into our auction versus selecting ads on bid alone.” The FTC says customers paid more than they would have if Amazon operated the auction in the way it claimed it did. “These inflated advertising charges allow Amazon to extract additional revenue from sellers on its platform, on top of the account fees, referral fees, and fulfillment and storage fees that increasingly both cut into Amazon sellers’ profit margins and lead to price increases borne by Amazon shoppers,” the lawsuit said.