The Federal Trade Commission (FTC) and 22 state attorneys general filed an updated complaint against Amazon with newly unredacted details about how the company allegedly inflated prices in its online search advertising auction.
The FTC and its state partners originally sued Amazon in August in the Western District of Washington, alleging the retailer covertly raised the prices advertisers paid on its platforms.
The newly unsealed material alleges that Amazon secretly increased advertising prices by up to 50% above auction results on ordinary days. During major shopping events like Prime Day and Black Friday, the alleged increases reached 250%.
Read on to learn what the unredacted complaint alleges, how Amazon responded to advertiser questions at the time, and what this means for how you evaluate historical campaign performance.
FTC Details Alleged Price Increases During Shopping Events
According to the FTC’s November 5 announcement, the unsealed sections of the complaint outline specific cost-per-click (CPC) increases and revenue targets tied to the alleged surcharges between 2021 and 2023.
The complaint alleges that Amazon’s hidden surcharges affected both small businesses and large advertisers across multiple peak shopping periods:
- 2021 holiday season: Amazon allegedly increased advertisers’ average CPC by 20%, while some advertisers experienced increases of more than 200%.
- 2022 holiday shopping season: Amazon allegedly raised its secret surcharges to generate an additional $87 million in worldwide revenue.
- Prime Day 2023: One large food and beverage advertiser faced price increases of more than 100%, and Amazon internally acknowledged that its price increases reduced the advertiser’s return on ad spend (ROAS) in ways that were “destroying campaign performance.”
These examples add detail to the original lawsuit, which challenged how Amazon calculated auction prices and explained those calculations to advertisers.
Allegations Tie Reserve Pricing To Revenue Targets
The unsealed material also links Amazon’s alleged surcharges to internal revenue goals.
According to the complaint, Amazon executives discussed needing an additional $40 million in revenue in 2023 to hit corporate financial targets.
The complaint quotes an email from the head of Amazon Ads to Amazon’s senior vice president of ad products and technology:
I’d like to pull out all of the stops (without doing unnatural acts) to close our gaps to plan. I suspect that the entire gap won’t be closed, so whatever can be done with reserves (ideally at least $40MM would be helpful).
The case concerns Amazon’s use of “soft reserve prices,” which can increase the final CPC above what competing bids would otherwise produce.
A soft reserve differs from a minimum bid required to enter an auction. Amazon says advertisers can win placements below the soft reserve, in which case they pay their bid.
The FTC alleges Amazon used undisclosed reserve pricing to increase advertiser charges while continuing to describe its auctions in misleading terms.
How Amazon Responded When Advertisers Questioned CPC Spikes
If you managed Amazon Ads between 2021 and 2023, you may remember questioning why CPCs jumped so sharply during peak shopping events.
According to the unredacted complaint, advertisers questioned Amazon directly about whether changes to its auction process explained higher CPCs.
In one instance, an advertiser asked whether “something has changed with respect to the second price auction process, either by design or mistake.”
The FTC alleges that an Amazon account manager gave a misleading response:
After reaching out to the product specialist team we were informed there is not a bug, or a change in auction style, so no worries there. This year the marketplace is even more crowded than any year previous, and we are seeing the spike in CPCs [costs-per-click] as a direct reflection.
The alleged exchange concerns more than whether CPCs increased. It concerns whether Amazon accurately explained the cause when an advertiser asked about changes to the auction.
Campaign reports show what advertisers paid and the performance that followed. They do not reveal how Amazon calculated the final CPC.
In its response to the original lawsuit, Amazon denied deceiving or harming advertisers. The company defended its reserve pricing and said advertisers never pay more than their maximum bid.
What This Means For Advertisers
While these allegations are still being litigated in federal court, the unsealed details give paid media teams important context for past and current campaign analysis.
If you manage Amazon Ads for your brand or clients, here’s a few proactive steps you can take:
- Revisit 2021 to 2023 peak-event benchmarks: If your historical year-over-year baselines include Prime Day or Q4 holiday data from 2021 through 2023, review your CPC and ROAS trends from those windows so you don’t benchmark future targets against artificially inflated cost periods.
- Brief clients and internal stakeholders: For agency teams and in-house leads who had to explain steep ROAS declines during Prime Day 2023 or the 2021 and 2022 holiday seasons, share the FTC’s unsealed findings to provide documented context for why costs rose so sharply.
- Separate CPC inflation from conversion rates during upcoming events: As Black Friday and Cyber Monday approach, monitor CPC changes alongside conversion rate and impression share so you can see whether efficiency drops are driven by click costs rather than shopper intent.
The 2021 through 2023 examples also shouldn’t be read as the full scope of the case. Earlier FTC materials discuss alleged conduct in 2024 and identify Sponsored Products, Sponsored Brands, and Display Ads.
What’s Still Unknown
The FTC’s press release summarizes the newly unredacted allegations, but it doesn’t state whether the alleged surcharge practices continued past 2023 or which specific Amazon search ad formats were included.
The newest release didn’t include a public response from Amazon regarding the newly unsealed details, however, Amazon did provide a full response dispute on August 31st regarding the lawsuit.
We’ll continue to report on this as more information from the court filings becomes available, or if Amazon provides an updated response to this new information.
Featured image: Bangla press / Shutterstock
