On August 31, 2026, the Federal Trade Commission (FTC), joined by the attorneys general (AGs) of 22 states, filed a complaint in the U.S. District Court for the Western District of Washington alleging that Amazon.com, Inc. overcharged its approximately 1.2 million advertising customers by manipulating the auctions it uses to set ad prices on its platform. The complaint alleges that, for more than seven years, Amazon covertly inflated advertising prices and that the alleged practice likely extracted more than $20 billion from its advertising customers. Amazon has not responded to the complaint yet, and the allegations have not been proven in court.
Link to Background: How Amazon Represents Its Ad Auctions Background: How Amazon Represents Its Ad Auctions
Amazon generates more than $68 billion in annual advertising revenue, primarily through online auctions for ad placements. Its core products — Sponsored Products, Sponsored Brands, and Display Ads — appear alongside search results on Amazon.com.
Since at least 2012, Amazon has told advertisers it runs a “generalized second price” (GSP) auction, the industry standard in digital search advertising. In a GSP auction, the winning bidder pays only the minimum amount needed to beat the next-highest bid — typically one cent more — incentivizing advertisers to bid their true valuation. According to the complaint, Amazon’s training materials, YouTube channel, online portals, and account representatives all consistently reinforced this message.
Link to Allegations Allegations
The complaint alleges that in late 2018 and early 2019, Amazon began overriding the prices its auctions produced and replacing them with higher prices Amazon set itself — without disclosure, and while continuing to tell advertisers it ran second-price auctions.
The mechanism, allegedly referred to internally as “soft reserve” pricing, worked by applying a hidden surcharge on top of the legitimate auction result, inflating the final price charged to the advertiser. According to the complaint, Amazon did not disclose that its auction pricing had “a surcharge hidden in it” and actively worked to prevent advertisers from discovering it.
Key allegations include:
- Incremental rollout to avoid detection. Amazon initially limited the percentage of auctions where it raised prices artificially, rolling out surcharges gradually to avoid triggering advertiser complaints;
- Opaque reporting to prevent scrutiny. Amazon controlled and limited the auction data available to customers, with its aggregated price reporting described internally as “opaque,” preventing advertisers from having visibility into the behavior of individual auctions;
- Exploiting peak shopping days. Amazon raised its maximum surcharge levels significantly during peak shopping events such as Prime Day and the holiday season, believing that increased shopping activity would “obfuscate” the resulting price increases; and
- Active cover-ups when complaints arose. When Amazon received nearly two dozen complaints from large customers during a December 2021 “CPC Spike” incident, it allegedly sent customers a false explanation attributing the price spike to higher advertiser and shopper demand rather than disclosing its surcharge practices.
The complaint allegedly cites internal documents in which Amazon employees raised concerns about the practices. A purported 2023 internal memo, as quoted in the complaint, acknowledged that the use of undisclosed reserve prices was not “doing the right thing for the advertisers” and that while the practices “increase our short-term revenue,” they would “hurt us in the long run.”
Link to The Alleged Harm and Relief Sought The Alleged Harm and Relief Sought
The complaint alleges that Amazon’s advertising customers — including more than 500,000 small and medium-size businesses — incurred substantial overcharges, and that those costs were ultimately passed through to Amazon shoppers in the form of higher product prices. The FTC brings claims under Section 5(a) of the FTC Act and the 22 plaintiff states bring claims under their respective consumer protection statutes. The complaint seeks a permanent injunction, monetary judgment, disgorgement, civil penalties, and restitution.
Link to Why It Matters Why It Matters
Regardless of how the litigation is resolved, the complaint raises several issues worth watching:
- Representations about pricing mechanics may be legally material. The complaint treats Amazon’s descriptions of its auction model not as marketing language but as material statements that shaped advertisers’ bidding strategies and spending decisions. Companies that describe how their prices are determined should ensure those descriptions match actual practice;
- Pricing transparency in closed-loop auction environments is under scrutiny. The complaint highlights the structural tension inherent in platforms that serve simultaneously as the auctioneer and the seller of advertising placements. Regulators appear increasingly focused on whether such arrangements are accompanied by adequate transparency;
- Internal documentation carries significant legal risk. The complaint draws heavily on alleged internal communications reflecting awareness that public-facing representations did not match actual pricing practices. Documents expressing concern about the gap between what customers are told and what is happening are exactly the kind of evidence regulators look for; and
- Multiforum enforcement by the FTC and state AGs amplifies exposure. The 21-state coalition reflects the continued trend of coordinated federal and state enforcement in consumer protection matters. Companies facing investigations by either the FTC or a state AG should assess the likelihood of parallel or joint proceedings and the cumulative exposure they create.
Troutman Pepper Locke State Attorneys General Team
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Ashley Taylor – Co-leader and Firm Vice Chair Ashley is co-leader of the firm’s nationally ranked State Attorneys General practice, vice chair of the firm, and a partner in its Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. He helps his clients navigate the complexities involved with multistate attorneys general investigations and enforcement actions, federal agency actions, and accompanying litigation. |
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Clay Friedman – Co-leader Clay co-leads the firm’s State Attorneys General practice and is nationally ranked by Chambers USA for AG Government Relations and in Best Lawyers for Advertising Law. He has dedicated his entire career to state attorney general and federal work, serving for nearly a decade in a senior role and more than 25+ years in private practice. Clay focuses his practice on helping industry-leading companies mitigate the risks associated with state and federal regulatory investigations and associated litigation. |
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Chris Carlson Chris advises clients on regulatory, civil, and criminal investigations and litigation. With a background as an assistant attorney general, he provides practical guidance to clients with matters involving state attorneys general and federal regulatory agencies. |
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Lauren Fincher Lauren has vast experience handling state attorneys general investigations, navigating complex regulatory compliance matters, and providing strategic counsel in enforcement actions across various industries. She helps clients manage high-stakes regulatory matters and guides them through complex legal landscapes. |
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Stephen Piepgrass Stephen leads the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, representing clients in single and multistate enforcement actions, including inquiries and investigations involving state attorneys general and other state and federal governmental enforcement bodies including the CFPB and FTC. He regularly represents clients in highly regulated sectors such as financial services, emerging technologies, health care, insurance, and education. |
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Michael Yaghi Mike handles high-profile investigations led by state attorneys general, the FTC, and other federal and state regulatory bodies. He assists clients through these complex government inquiries, assisting them throughout the entire life cycle of investigations, from regulatory enforcement through formal litigation. |
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Matthew J. Berns Drawing on his experience in senior leadership roles in the New Jersey Attorney General’s and Governor’s Offices and as a trial attorney for the U.S. Department of Justice, Matt provides an insider’s perspective when guiding clients through complex government investigations, litigation, and other actions. |
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Jeff Johnson Jeff helps clients navigate complex regulatory and litigation challenges with local, state, and federal authorities. His clients benefit from his decade of broad litigation experience, understanding of emerging state and federal regulatory issues, and strong relationships with attorneys general across the U.S. In addition to handling cases from trial through state or federal appeals, Jeff serves as amicus counsel in advancing legal rules to support his clients’ vital interests. |
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Jay Myers Jay assists clients in heavily regulated industries, including health care, energy, insurance, emerging industries, and data privacy. He provides both regulatory legal advice and government relations strategies. Jay’s past and current clients include Fortune 10 companies, startups, nonprofits, industry associations, and advocacy groups. Recognizing that state government matters are often complex and multifaceted, he utilizes regulatory guidance, government advocacy, or both in tandem to deliver tailored solutions for each client’s unique needs. |
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Zoe Schloss Zoe represents clients in litigation and government investigations. As former deputy attorney general for the Delaware Department of Justice, she is an experienced litigator who understands the enforcement priorities that impact her clients. Zoe works with individuals and corporate entities in highly regulated industries, including financial services, health care, and energy. |
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Jessica Birdsong Jessica is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, magna cum laude, where she served as associate articles editor of the Journal of Law & Technology. |
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Sydney Goldberg Sydney is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She advises clients on regulatory compliance and state attorney general (AG) investigations in highly regulated industries, including health care and life sciences. She routinely helps clients navigate alcohol compliance and licensing issues, helping proactively manage regulatory risk. |
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Troy Homesley Troy is an accomplished litigator who has represented and defended clients across a wide range of complex, high-stakes disputes at both the trial and appellate levels. He has represented technology companies, business executives, law firms, investment funds, high-ranking federal officials, international non-profits, and asylum seekers. Troy draws on his broad litigation experience to advise clients before litigation arises, while claims are pending or threatened, and leading up to and through trial and appeals. |
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Namrata Kang Namrata (Nam) is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. She routinely advises clients on a wide variety of state and federal regulatory matters, with a particular emphasis on state consumer protection laws relating to consumer financial services and marketing and advertising. Nam’s experience transcends multiple industries, including financial services, telecommunications, media, and sports betting. |
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Michael Lafleur Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general. |
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William LaRosa Bill represents clients in complex regulatory investigations, state attorneys general matters, and enforcement proceedings. He draws on his experience as a former assistant U.S. attorney and as a private-sector litigator advising corporations in high-stakes litigation and regulatory investigations, including multistate AG investigations. |
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Lane Page Lane represents financial institutions and other clients in federal and state regulatory investigations and complex civil litigation. He is particularly focused on consumer protection and fair lending issues. |
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Dascher Pasco Dascher provides strategic counsel and representation to clients navigating regulatory compliance, enforcement, and high-stakes litigation. She regularly represents clients in both single and multistate state attorney general (AG) investigations and enforcement actions, as well as before other state enforcement bodies and local government agencies. |
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Kyara Rivera Rivera Kyara is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement Practice Group. She received her J.D. from the University of Richmond School of Law, cum laude, where she served as publications and online editor of the Public Interest Law Review. |
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Timothy Shyu Timothy advises clients on regulatory compliance and enforcement in highly regulated industries, including health care and life sciences, data privacy and cybersecurity, and emerging technology. He assists companies in navigating complex investigations and enforcement actions, helping them mitigate regulatory risk proactively. |
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Trey Smith Trey focuses his practice on representing and advising regulated utilities before state public utility commissions. He routinely helps clients obtain certificates of public convenience and necessity for transmission infrastructure. In this role, Trey works with his clients’ subject-matter experts to manage administrative proceedings, including by preparing initial filings; responding to discovery requests; drafting rebuttal testimony; and litigating any disputed issues. |
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Daniel Waltz Dan helps clients navigate all aspects highly regulated relationships between industry participants and federal, state and local governments. Whether engaging with regulators, negotiating transactions or representing clients in the courtroom, he delivers solutions that help his clients achieve their strategic goals. |
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Stephanie Kozol Stephanie is Troutman Pepper Locke’s senior government relations manager in the state attorneys general department. |