The FTC and 22 states say undisclosed reserve prices drove up what more than one million sellers and brands paid for ads. Amazon denies deception and says its system improved results without charging advertisers above their bids.
NEWARK, NJ – New Jersey has joined the Federal Trade Commission and 21 other states in a federal lawsuit alleging that Amazon secretly changed the pricing in its advertising auctions, causing sellers and brands to pay billions of dollars more than the auction system they were told they were using would have produced.
The 181-page complaint filed Aug. 31 in the U.S. District Court for the Western District of Washington alleges that Amazon began inserting undisclosed “soft reserve” prices into its ad auctions in 2019. Regulators contend those reserves functioned like an invented competing bid, raising the price paid by the winner even when no real advertiser had submitted the second bid that set the charge.
Amazon strongly disputes the allegations. No court has determined that the company violated the law.
The case concerns ads that appear in and around Amazon search results, including Sponsored Products. The FTC says Amazon represented the process as a generalized second-price auction. In that type of auction, the top-ranked advertiser generally pays only enough to beat the next-ranked competitor, rather than automatically paying its own maximum bid.
According to the complaint, Amazon instead charged Sponsored Products advertisers their own winning bid close to 80 percent of the time in 2024. The regulators allege the practice affected more than one million advertisers, including more than 500,000 small and medium-sized businesses, and likely extracted more than $20 billion from advertising customers.
Those figures are allegations drawn from the government’s complaint. They have not been tested at trial.
Why New Jersey is in the case
New Jersey brings two counts under the state Consumer Fraud Act. The complaint accuses Amazon of unconscionable commercial practices, deception, misrepresentation and the knowing concealment or omission of material facts in connection with advertising and sales to New Jersey consumers.
The plaintiffs seek court orders stopping the challenged conduct, monetary relief, civil penalties and other remedies. The filing does not create a refund process for advertisers, and it does not mean New Jersey sellers are automatically entitled to payment.
The public stakes extend beyond large brands. Amazon’s ad system is used by independent merchants competing for visibility in the same search results shoppers use to choose products. The FTC alleges that higher advertising costs were passed on to consumers. Amazon says the complaint contains no evidence that the pricing system increased consumer prices.
Amazon says relevance, not a hidden bidder, explains the pricing
In a detailed response published the same day, Amazon said reserve prices are common in advertising and are used to reflect the value of a placement. The company said an advertiser never pays more than its maximum bid and that its system weighs an ad’s relevance to the shopper rather than simply selecting the highest bid.
Amazon reported that approximately 92 percent of Sponsored Products ads placed in 2024 did not come from the highest bidder. It also said average winning bids fell by 50 percent from 2019 to 2025, inflation-adjusted cost per click remained flat from 2019 through 2024, and conversion rates increased 24 percent from 2021 through 2025. Those are company figures and have not been adjudicated.
The company acknowledged that it uses soft reserves and that some older educational materials used simplified descriptions of its auctions. Amazon said the main campaign-building tools have told advertisers since 2018 that they could be charged up to their bid, and that it has updated help materials to explain reserve prices explicitly.
The central dispute is therefore not whether reserve prices existed. It is whether Amazon adequately disclosed how they affected auction prices, whether its public explanations misled advertisers and whether the practice violated federal and state consumer-protection laws.