New York Attorney General Letitia James joined a bipartisan coalition of 21 other states and the Federal Trade Commission in suing Amazon, alleging the company manipulated its advertising auction system to secretly overcharge more than one million advertising customers by upward of $20 billion, according to Our Time Press. The lawsuit, filed Monday, August 31, names Amazon and specifically identifies hundreds of thousands of small and medium-sized businesses among the affected advertisers. For small business owners who rely on Amazon’s Sponsored Products and Sponsored Brands placements to reach shoppers, the allegation raises immediate questions about whether their advertising budgets have been quietly stretched thinner than they realized.
It is important to note these are allegations contained in a newly filed complaint, not findings a court has yet reviewed or ruled on. Amazon has not been found liable for any of the conduct described, and the case is in its earliest stages.
What the Lawsuit Alleges About Amazon’s Advertising Platform
According to the state’s allegations, as reported by Our Time Press, Amazon manipulated the auction system it uses to price ads sold on its e-commerce site, potentially driving up costs for more than one million advertising customers. Amazon has told advertisers for years that it runs “second price” auctions, in which the winning bidder pays only the minimum amount necessary to beat the next-highest bid. The lawsuit alleges Amazon began manipulating those auctions in 2018 by submitting fake second-place bids, effectively forcing advertisers to pay more than the auction’s own stated rules would require.
The Federal Trade Commission, in its own press release on the case, described the alleged mechanism in more detail, saying Amazon added an undisclosed pricing floor internally referred to as a “soft reserve price” starting in 2019 – though that detail comes from the FTC’s official announcement rather than the Our Time Press report itself. According to the FTC’s press release, the agency alleges Amazon charged advertisers their own winning bid – effectively turning a second-price auction into a first-price one – close to 80% of the time by 2024, up from between 30% and 40% in 2021.
Reuters reported that Amazon disputes the characterization of harm, stating in a company blog post that its average cost-per-click for advertisers remained flat between 2019 and 2024 and that winning bids on sponsored product search ads fell 50% over a similar period, according to Reuters. That response is disputed territory in an active lawsuit, and the specific figures cited by both sides have not been tested in court. The version of the Our Time Press article available for this report does not include Amazon’s response, additional auction mechanics, or the remedies the states and FTC are seeking, so those details should be treated as incomplete pending further reporting.
How Alleged Ad-Auction Inflation Could Affect Small-Business Budgets
The lawsuit’s inclusion of small businesses among the more than one million affected advertisers is notable because many small operators depend on Amazon’s advertising marketplace as a primary – sometimes only – channel for reaching customers on the platform. If the allegations hold up, the mechanism described would mean advertisers were bidding under the assumption that competitive second-price rules would cap what they actually paid, when in practice the price floor may have been set by Amazon itself rather than by another bidder.
Neither the Our Time Press report nor the underlying complaint summary available for this article provides a breakdown of how the alleged $20 billion in overcharges was distributed across advertisers of different sizes, or over what specific time period any individual business might have been affected. That means it is not possible, based on the available material, to say how much any particular small business may have overpaid, or whether every small advertiser experienced the alleged effect equally.
What can reasonably be flagged as a risk, rather than a proven outcome, is that auction-based advertising systems depend on advertisers trusting the pricing mechanism to set their bidding strategy. Small businesses with fixed monthly ad budgets have less room to absorb unexpected cost increases than larger advertisers, and questions about auction transparency have already surfaced elsewhere in the industry – concerns Business2Community has covered in the context of rising digital ad costs and legislative scrutiny on Capitol Hill. Separately, small businesses have also had to contend with ad spend lost to fraudulent traffic rather than pricing mechanics, a related but distinct problem detailed in prior reporting on ad-fraud botnets disrupting Google’s advertising ecosystem.
What the Evidence Does and Does Not Show
The primary source material reviewed for this story establishes the core allegation and the scale of the claimed overcharge, but it stops short of providing the underlying methodology. There is no sample size, no advertiser-level calculation, and no explanation in the available text of how the $20 billion figure was derived or how it might vary by business size, ad format, or time period.
This gap matters because aggregate figures in a government complaint – even one this large – do not automatically translate into a uniform effect on every advertiser named in the case. Without customer-level detail, it would be premature to assume any specific small business was overcharged by a particular amount or that all businesses experienced the alleged manipulation identically. The broader debate over automated and algorithmic pricing systems, and the compliance questions they raise for smaller companies, has also drawn attention in other contexts, including state-level policy efforts targeting surveillance pricing practices.
The lawsuit also does not, based on the available reporting, specify what remedies the states and FTC are pursuing – whether that means monetary damages, structural changes to how Amazon discloses its auction mechanics, or some combination of both. Those questions are likely to be central to how the case develops in federal court.
The Allegation Remains Unresolved
The claims described here come from a lawsuit filed by Attorney General Letitia James alongside 21 other states and the FTC, and they represent one side’s version of events at the earliest stage of litigation. The available reporting does not include an independent verification of the allegations, a court ruling, or a detailed account of Amazon’s formal legal response beyond the general denial reported by Reuters.
Small businesses that advertise on Amazon’s platform will likely be watching how the case proceeds, but as of this reporting, the alleged overcharging remains a claim in a filed complaint – not an established fact.