The Federal Trade Commission and 22 state attorneys general sued Amazon in the Western District of Washington on Monday, alleging the company skimmed more than $20 billion from advertisers since 2019 by inserting an undisclosed surcharge into what it had marketed as a second-price auction. Per Bloomberg’s reporting on the complaint, 1.2 million advertising customers were affected, including more than 500,000 small and medium-sized businesses.

The mechanism is the story. Amazon told advertisers on Sponsored Products, Sponsored Brands and Sponsored Display that a winner “only pays the least bid amount needed” to clear the auction. Internally, according to the complaint, engineers added what they called a “soft reserve price” and, per CNBC’s account of the filing, used an “invented auction participant” that lifted clearing prices. Markups ran larger during Prime Day and Black Friday, when demand was least elastic.

“Amazon has millions of advertising customers who were misled into paying significantly higher prices,” FTC Chairman Andrew Ferguson said.

Amazon called the suit “misguided” in a blog post, arguing cost-per-click on Sponsored Products was flat on an inflation-adjusted basis between 2019 and 2024, that conversion rates rose 24 percent, and that its auctions saved advertisers $8 billion between 2021 and 2025. Those defenses concede the outputs while contesting the framing of the inputs.

For founder-led sellers who treat Seller Central as ground truth on customer-acquisition cost, the six-year window is the uncomfortable part. Cost-per-customer figures pulled from the dashboard since 2019 sit atop a price that, if the FTC is right, wasn’t the auction’s price.

The complaint seeks civil penalties and restitution. A separate FTC monopoly trial against Amazon is scheduled for early next year, and this filing joins a widening enforcement posture around ad-platform pricing transparency, alongside ChatGPT’s self-serve ad rollout across 40 markets, Microsoft’s general availability of AI Max for search, and Google’s new charges on Local Services Ads calls.

Sources