# New Jersey Joins FTC Challenge to Amazon’s Advertising Auction System 2026-09-09 · New Jersey · Reported Feature Regulators say undisclosed reserve pricing changed what advertisers were paying. Amazon says the case misunderstands how its ad marketplace works and ignores performance gains for advertisers and shoppers. Regulators say undisclosed reserve pricing changed what advertisers were paying. Amazon says the case misunderstands how its ad marketplace works and ignores performance gains for advertisers and shoppers. --- New Jersey has joined the Federal Trade Commission and 21 other states in a federal lawsuit challenging the way Amazon priced advertising sold inside its online marketplace, putting a familiar digital transaction under an unusually detailed legal microscope: the auction that decides which sponsored products shoppers see and what advertisers pay to appear there. The complaint, filed Aug. 31 in the U.S. District Court for the Western District of Washington, alleges that Amazon told advertising customers it used a form of generalized second-price auction while secretly introducing reserve pricing that could push the final charge above the price produced by that auction. Regulators allege the practice affected roughly 1.2 million advertising customers and likely extracted more than $20 billion in additional payments. Those are allegations in a pending civil case, not findings of wrongdoing. Amazon strongly disputes the government’s account. In a detailed public response, the company called the lawsuit misguided and said regulators are focusing on simplified or outdated descriptions of a system that evolved to place greater weight on ad relevance. Amazon says advertisers were never charged more than their bids, that average cost-per-click remained flat after inflation from 2019 through 2024, and that its approach improved advertising performance. What the lawsuit says changed At the center of the dispute is a distinction that sounds technical but changes how a bidder approaches an auction. In a conventional second-price model, the winner does not simply pay its own maximum bid. The final price is instead tied to the next-highest competitive result, giving bidders less reason to shade their bids downward out of fear that they will be forced to pay every dollar they offered. The FTC and the states allege that Amazon repeatedly described its system to advertisers in those terms, including public training and sales materials that suggested a winning advertiser would generally pay only what was needed to beat the next-ranked competitor. The government says that beginning in 2019, Amazon added what it internally called soft reserve pricing, allowing the company to raise the price above the result of the generalized second-price calculation. According to the complaint, the effect became increasingly significant. Regulators allege that for Sponsored Products ads, advertisers paid their own bid roughly 30% to 40% of the time in 2021, about 70% in 2022 and approximately 80% in 2024. The complaint also cites internal Amazon documents describing hidden surcharges and a calculated proxy price that regulators characterize as an invented auction participant used to lift prices. New Jersey’s role New Jersey Attorney General Jennifer Davenport joined the case under the state Consumer Fraud Act. The New Jersey counts allege unconscionable commercial practices, deception, misrepresentation and knowing concealment or omission of material facts in connection with Amazon’s sale of digital advertising placements. The state is seeking injunctive and monetary relief available under New Jersey law, including civil penalties and restitution. The New Jersey Attorney General’s Office framed the case as both a business-cost and consumer issue, arguing that higher advertising expenses can move through the retail chain. The FTC makes a similar pass-through claim in its announcement. That consumer link is itself disputed. Amazon says the complaint does not provide evidence showing that the challenged ad-pricing practices raised retail prices and argues that the government’s own damages theory is focused on advertisers rather than shoppers. Amazon says the auction is being described too simply Amazon does not deny using reserve prices. Instead, the company argues that reserves are a normal part of advertising markets and that the government is mischaracterizing how its system selects and prices ads. Amazon says its auction weighs both the advertiser’s bid and the relevance of the product to the shopper, rather than awarding placement to the highest dollar bid alone. The company says that in 2024 about 92% of selected Sponsored Products ads were not the highest bid and that the mean winning advertiser’s bid ranked around 128th by bid amount. Amazon also says average winning bids for Sponsored Products search ads fell 50% from 2019 to 2025, while conversion rates rose more than 24% from 2021 through 2025. Its response also attacks a central assumption of the government’s theory: that advertisers relied on a simplified description of auction mechanics when deciding how much to bid. Amazon argues that advertisers and automated bidding systems routinely adjust campaigns using observed cost, clicks, sales and return on ad spend. Under that view, real-world performance, not a textbook auction label, is what drives bidding behavior. The question underneath the mechanics That leaves the case with two related but distinct questions. One is economic: whether Amazon’s reserve-pricing system caused advertisers to pay more than they otherwise would have paid and whether those costs produced measurable harm. The other is about disclosure: whether Amazon accurately told customers how the price was being determined while asking those customers to make bidding decisions inside the system. The distinction matters because the existence of reserve pricing, by itself, is not the entire dispute. Amazon openly defends reserve prices as a way to reflect the value of an ad placement. Regulators are alleging something narrower and more consequential: that Amazon’s public descriptions created one understanding of the auction while internal pricing mechanisms produced another, and that the gap was intentionally concealed. Amazon says that characterization is false, that it has provided advertisers with guidance about its pricing system, and that the FTC built its case from a small set of simplified communications rather than the broader operation and performance of the marketplace. The company says it looks forward to making that case in court. For now, there has been no judicial determination that Amazon violated federal or New Jersey law. What the lawsuit has already exposed, however, is an increasingly important feature of digital commerce: the rules visible to a user and the machinery operating underneath them are not always the same thing. Whether that difference was deceptive in Amazon’s advertising marketplace is now a question for the court. SOURCE NOTES • Federal Trade Commission — Press release, “FTC, States Sue Amazon Over Secret Ad Surcharge Scheme” (Aug. 31, 2026) • Federal Trade Commission — Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC et al. v. Amazon.com, Inc. (filed Aug. 31, 2026) • New Jersey Office of the Attorney General — “AG Davenport Sues Amazon with FTC and 21 States for Rigging Advertising Auctions, Reaping Billions in Illegal Profits” (Aug. 31, 2026) • Amazon — “Amazon’s response to the FTC’s lawsuit regarding Sponsored Ads” (Aug. 31, 2026) • Federal Trade Commission — Amazon case page (case status: pending) --- ProbleMattic is written and maintained by Matthew Kulcsar, a software engineer, project manager, technologist, platform builder, emergency-services-trained helper, grandfather, and lifelong collector of broken systems, odd behaviors, and useful nonsense.