Federal Complaint Alleges Amazon Inflated Seller Advertising Costs by $20 Billion

Industry Pulse News Desk · 2026-08-31

A federal court complaint claims Amazon covertly manipulated digital advertising auctions over a seven-year period using a pricing mechanism that artificially raised costs for sellers.

A newly unredacted federal court complaint alleges that Amazon artificially inflated digital advertising costs for independent sellers by more than $20 billion over a seven-year period. The filing claims the e-commerce giant used a hidden mechanism in its ad auctions to systematically drive up minimum bid prices without informing participating merchants.

According to the lawsuit, Amazon implemented an internal tool known as a soft reserve within its advertising platform. The algorithm automatically placed bids on behalf of the system or raised baseline pricing thresholds, forcing advertisers to pay higher rates to secure prominent search placements and sponsored listings on the site.

Regulators and plaintiffs allege the practice operated continuously from 2016 through 2023, directly impacting millions of third-party merchants who rely on sponsored ads to generate sales. Internal communications cited in the document suggest company executives were aware that the pricing adjustments effectively caused Amazon to compete against its own advertising clients.

Digital advertising has become one of Amazon's fastest-growing and most lucrative business segments, generating tens of billions of dollars in annual revenue. Representatives for the company have denied wrongdoing, maintaining that its advertising products are designed to provide value to sellers and enhance buyer search experiences.

The allegations form part of a broader federal antitrust case examining the retailer's marketplace practices. The court is expected to review additional motions regarding the platform's pricing structures in upcoming proceedings.