Attorney General Clark Sues Amazon for Ad Surcharge Scheme

Attorney General Charity Clark and a bipartisan coalition of 21 other state attorneys general today joined the Federal Trade Commission (FTC) in filing a lawsuit against Amazon, alleging that the company engaged in deceptive and unfair practices that inflated prices in its online search advertising auctions.

The complaint alleges that, for over seven years, Amazon has covertly and substantially increased the prices to advertise on its platform, which more than one million brands and sellers were required to pay, and that Amazon has likely illegally extracted tens of billions of dollars from its advertising customers, which included over 500,000 small- and medium-sized businesses.

"Vermont's businesses rely on advertising platforms to reach customers and support themselves," said Attorney General Clark. "Manipulating or misleading businesses into spending more than they should on advertising is deceitful and unlawful, and we will hold companies accountable when they put their own profits ahead of Vermont businesses."

In the complaint filed today, the coalition argues that Amazon imposed undisclosed surcharges on advertising customers that participated in auctions for advertising placements on Amazon's website and mobile app. In these auctions, prospective advertisers bid to place Sponsored Product ads, Sponsored Brands ads and Display Ads alongside the results that appear when a consumer searches for a product using a keyword on Amazon's store. Placements are auctioned to the highest-ranked bidder for each keyword.

As described in the complaint, Amazon has represented to prospective advertisers for years that Amazon runs "second price" auctions where the winner of the auction would only pay "one cent more than the next highest bidder" for each successful bid. However, in practice, the complaint alleges that Amazon has charged its Sponsored Products advertisers their own winning bid close to 80% of the time and has effectively converted its nominally "second price" auction into a first price auction. The complaint further alleges that, beginning in 2019, Amazon changed its auction rules without notice by adding an undisclosed surcharge that Amazon referred to internally as a "soft reserve price." The complaint alleges that Amazon and its senior executives took active steps to conceal its surcharge pricing system from its advertisers, including giving false and misleading answers to advertisers who asked the company directly if it had changed its auction format, so that they would continue to be deceived about how the prices they pay are set.

The complaint also alleges that Amazon's unlawful scheme has generated tens of billions of dollars of revenue for the company by, for example, substantially increasing the prices charged to advertisers on ordinary shopping days and applying far greater increases to prices on high-volume shopping days like Prime Day and Black Friday. The complaint quotes notes from a 2024 discussion between senior Amazon executives, where it was acknowledged that Amazon's "clever non-transparent way to charge first price" has been an "incredibly effective way to drive revenue."

Joining Attorney General Clark in filing this lawsuit are the attorneys general of Alaska, Arizona, California, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Nebraska, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Rhode Island, South Carolina, and Washington, and the Federal Trade Commission.

Contact: Haley Sommer, Senior Advisor to the Attorney General, 802-828-3171