On August 31, 2026, the Federal Trade Commission and 22 state attorneys general filed a federal lawsuit alleging that Amazon secretly overcharged approximately 1.2 million advertisers by more than $20 billion over seven years through a hidden auction surcharge the company called “Project Nessie.” If the allegations are proven, the sellers and brands who ran Sponsored Products, Sponsored Brands, and Sponsored Display campaigns on Amazon between 2019 and 2026 paid materially more for every Amazon advertising auction win than Amazon’s own mechanics said they should have paid. The FTC v. Amazon advertising case is the largest government enforcement action against Amazon’s marketplace operations in 2026.
The case, United States v. Amazon.com, Inc., No. 2:26-cv-03097, is pending in the US District Court for the Western District of Washington. Nothing in the complaint has been proven in court, Amazon disputes the FTC’s characterization of its auction system entirely, and no remedy has been ordered.
What the complaint does establish is the factual framework that will drive this litigation for the next several years, and it raises specific questions for Amazon advertisers: whether they are part of the class of affected advertisers, what their potential recovery could be if the allegations are proven, how they can preserve evidence of their advertising spend, and what the realistic litigation timeline looks like for a case of this complexity. This guide covers those questions from the perspective of a law firm that represents Amazon sellers.
Why this case matters for Amazon advertisers specifically
This is not a consumer protection case about the products sold on Amazon. It is a case about Amazon advertising costs: the money sellers and brands spent running Sponsored Products, Sponsored Brands, and Sponsored Display campaigns. Every dollar of alleged overcharge came directly from advertiser budgets. The FTC’s case, if successful, creates a path to recovery for those advertisers.
FTC v. Amazon advertising lawsuit at a glance, confirmed from the FTC complaint and press release:
- Filed: August 31, 2026, US District Court for the Western District of Washington
- Case number: 2:26-cv-03097
- Plaintiffs: Federal Trade Commission and attorneys general of 22 states
- Defendant: Amazon.com, Inc.
- Alleged conduct: Amazon applied an undisclosed “soft reserve price” surcharge on top of its second-price auction results, inflating prices charged to advertisers without disclosure
- Internal name: “Project Nessie”
- Duration: Alleged to have begun in late 2018 / early 2019 and continued for more than seven years
- Products affected: Sponsored Products, Sponsored Brands, Sponsored Display
- Estimated overcharge: More than $20 billion across approximately 1.2 million advertisers
- Legal basis: FTC Act Section 5(a): deceptive and unfair practices; 22 state consumer protection statutes
- Relief sought: Civil penalties, restitution, and additional equitable relief
- Status: Complaint stage. No liability found. No remedy ordered. Amazon disputes all allegations.
Table of Contents
- What Project Nessie Is and How It Allegedly Worked
- Which Amazon Advertisers Are in the Affected Class
- What the FTC Must Prove to Win This Case
- Amazon’s Defense and Why It Matters
- What Potential Recovery Looks Like for Affected Advertisers
- What Amazon Advertisers Should Do Right Now
- The Realistic Litigation Timeline
- Does This Affect Amazon Advertising Costs Right Now
- Frequently Asked Questions
- How DAM Law Firm Can Help
What Project Nessie Is and How It Allegedly Worked
Amazon’s advertising auctions for Sponsored Products, Sponsored Brands, and Sponsored Display operate on a second-price auction model. Specifically, in a genuine second-price auction, the winning bidder pays the amount of the second-highest competing bid, not their own bid. This mechanism encourages advertisers to bid their true value rather than strategically underbidding. Amazon told advertisers this is how its system worked.
The alleged mechanism
The FTC complaint alleges Amazon ran a generalised second price auction and then applied an undisclosed soft reserve on top of the result, converting the auction price into the price actually charged. In plain terms, after the legitimate auction concluded and the second-price result was calculated, Amazon allegedly inserted an artificial minimum price floor below which it would not accept the winning bid. If the legitimate auction result fell below that floor, the winning advertiser paid the floor price rather than the auction result. Amazon set the floor without disclosing it.
The shill bidder analogy
The FTC complaint draws a direct comparison to classic auction fraud. Amazon’s reserve price was allegedly inserted only after real bidding closed, calibrated to lose by the smallest possible margin, and never meant to win the placement. Its sole purpose was to inflate what the real winner had to pay. The complaint describes Amazon as using an “invented auction participant” to increase prices, citing internal Amazon communications. Importantly, for advertisers, this means the auction they were participating in may not have been the auction that determined what they paid. The reported CPC in their campaign dashboard reflected the outcome of an auction system that included a hidden component they had no knowledge of and no ability to account for in their bidding strategy.
The rollout pattern
According to the complaint, Amazon initially limited the percentage of auctions where it raised prices artificially, rolling out surcharges gradually to avoid triggering advertiser complaints. Starting in Sponsored Brands during the 2018 Christmas period, the mechanism extended to Sponsored Products in early 2019. The gradual rollout is significant for litigation purposes: it suggests Amazon was aware the surcharge would be detectable if implemented broadly. Amazon allegedly designed this staged approach specifically to avoid detection. That internal awareness, if proven, strengthens the FTC’s deception claim.
Which Amazon Advertisers Are in the Affected Class
The FTC complaint identifies approximately 1.2 million advertisers as having been affected by the alleged surcharge. That figure covers every advertiser who ran Sponsored Products, Sponsored Brands, or Sponsored Display campaigns during the period the soft reserve mechanism was active. Based on the complaint, the affected period runs from late 2018 through August 31, 2026.
What “affected” means at this stage
Being part of the class of approximately 1.2 million advertisers does not automatically mean a specific advertiser suffered a material overcharge or is entitled to specific compensation. The amount of overcharge any individual advertiser experienced depends on how frequently the soft reserve floor was triggered in their specific auctions, the gap between the legitimate auction result and the floor price on each triggered auction, and the total volume of their advertising spend during the affected period. Higher-spend advertisers in competitive categories are more likely to have experienced material overcharges. Those with very limited spend or primarily in high-organic categories may have experienced minimal impact.
Amazon sellers who are also advertisers
For Amazon sellers who both operate seller accounts and run advertising campaigns, the lawsuit intersects with their broader Amazon relationship in a specific way. These sellers are simultaneously Amazon’s customers for advertising services and Amazon’s marketplace participants whose selling fees fund Amazon’s operations. The advertising overcharge, if proven, affected their advertising cost of sale and therefore their profitability calculations for every promoted product during the affected period. A seller who ran Sponsored Products campaigns continuously since 2019 and spent $50,000 or more annually in advertising is within the range of advertisers who may have experienced material overcharges worth quantifying.
What the FTC Must Prove to Win This Case
The FTC’s case rests on FTC Act Section 5(a), which prohibits unfair or deceptive acts or practices in commerce. This is a consumer protection case, not an antitrust case. The legal standard the FTC must meet differs from what an antitrust case requires, and understanding the distinction helps predict how this litigation will proceed.
The deception theory
To win on the deception claim, the FTC must prove that Amazon’s representations about its auction mechanics were material, likely to mislead a reasonable advertiser, and actually deceptive. That means Amazon told advertisers it ran a second-price auction while operating a system that was not, in the relevant respects, a second-price auction. According to the complaint, Amazon did not disclose that its auction pricing had “a surcharge hidden in it” and actively worked to prevent advertisers from discovering it. Notably, internal communications cited in the complaint, where Amazon executives discussed the soft reserve mechanism and its effect on advertiser prices, are the primary evidence supporting the deception theory.
The unfairness theory
The unfairness claim does not require proof of deception. Instead, the FTC must show that Amazon’s practice caused substantial consumer harm, that the harm was not reasonably avoidable by advertisers, and that the harm was not outweighed by countervailing benefits. The inability to detect the soft reserve surcharge from campaign reporting data supports the “not reasonably avoidable” element, because the surcharge was not disclosed in any Amazon-facing documentation. Amazon’s argument that advertisers saved $8 billion through the same system addresses the countervailing benefits element directly. That is why the argument is strategically important to Amazon’s defense rather than merely a public relations response.
Amazon’s Defense and Why It Matters
As CNBC reported on August 31, Amazon called the lawsuit “misguided” and said the complaint “fundamentally misunderstands how advertisers operate,” disputing any suggestion that consumers paid more as a result of its ad practices. The company said its auction systems delivered $8 billion in savings to advertisers between 2021 and 2025, and pointed to disclosures about pricing and auction mechanics available within its campaign-management tools.
The $8 billion savings argument
Amazon’s claim that advertisers saved $8 billion under the same pricing system during the 2021 to 2025 period is the company’s primary affirmative defense. Amazon argues that even if the soft reserve mechanism existed, the overall competitive dynamics of its advertising marketplace produced prices lower than what a different auction design would have generated. The result, Amazon claims, was net savings rather than net harm. This argument addresses the unfairness claim’s countervailing benefits element directly and, if supported by expert economic analysis, could reduce or eliminate the FTC’s ability to establish net consumer harm. It does not address the deception claim, which does not require net harm, only material deceptive conduct.
The disclosure argument
Additionally, Amazon’s reference to disclosures available within its campaign-management tools suggests the company will argue that advertiser-accessible information about its pricing system provided sufficient notice that the system was not a pure second-price auction. However, whether that disclosure argument succeeds depends on the specificity and accessibility of the disclosed information and whether it was sufficient to alert a reasonable advertiser that a soft reserve surcharge might be applied on top of the competitive auction result. Courts applying Section 5(a) typically evaluate disclosure adequacy from the perspective of a reasonable consumer in the relevant market, not from the perspective of a sophisticated analyst who reads every line of platform documentation.
What Potential Recovery Looks Like for Affected Advertisers
The FTC complaint seeks civil penalties, restitution, and additional equitable relief. Understanding what each of these remedies means for individual Amazon advertisers determines what the potential recovery picture looks like if the FTC prevails.
Civil penalties
Notably, civil penalties in FTC Section 5(a) cases go to the US Treasury, not to injured parties. The civil penalty component of the case benefits the government rather than individual advertisers. As the FTC’s press release confirms, civil penalties in major platform cases have historically been substantial. The FTC’s settlement with Amazon in the Prime subscription case resulted in a $2.5 billion payment, but those amounts are not distributed to affected advertisers.
Restitution to advertisers
The restitution request is the component that could produce direct payments to affected Amazon advertisers. Restitution in FTC cases is designed to restore injured parties to their pre-injury position, which in this case means returning to advertisers the amount they overpaid as a result of the soft reserve surcharge. The $20 billion figure cited in the complaint represents the FTC’s estimate of total overcharges across all affected advertisers. Individual restitution amounts would depend on each advertiser’s share of that total, calculated from advertising spend records during the affected period. The practical challenge is that the FTC must win the case before any restitution is ordered, and the litigation path from complaint to final remedy typically takes several years in cases of this complexity.
Private litigation as a parallel path
FTC enforcement actions do not preclude private class action litigation by affected advertisers seeking their own remedy. In major platform antitrust and consumer protection cases, class action litigation by private plaintiffs has historically run parallel to or followed FTC enforcement actions, sometimes producing earlier settlements than the government case. Amazon sellers and brands who spent significant amounts on Amazon advertising and believe their advertising costs were inflated by the soft reserve mechanism should be aware that private litigation options may develop alongside the FTC case. Consulting legal counsel about preserving advertising spend records and monitoring class action developments is appropriate for advertisers in the high-spend category.
What Amazon Advertisers Should Do Right Now
The most actionable step for Amazon advertisers today is preserving evidence of their historical advertising spend. If restitution is ultimately ordered through the FTC case or through private class action settlement, the amount any advertiser can recover will depend on their documented advertising spend during the affected period.
Download and preserve all available campaign reports
Importantly, Amazon’s advertising reporting system retains campaign-level data for a limited period. Advertisers should download all available historical reports from Amazon Advertising, including campaign performance reports, search term reports, targeting reports, and billing statements, for every year they have run campaigns since 2019. The data in these reports establishes the baseline advertising spend record that would support a restitution claim. Data that is not downloaded before Amazon’s reporting retention window closes may become unavailable. The specific retention periods vary by report type. Beginning the download process now, rather than waiting to see whether the FTC case progresses, preserves the most complete record possible.
Document total advertising spend by year and product line
Beyond the campaign-level reports, a summary of total advertising spend by year, ideally reconciled against Amazon billing statements, provides the highest-level evidence of the advertiser’s total exposure during the affected period. This document, prepared from Amazon billing records and campaign reports, serves as the foundation of any future recovery claim. Sellers who have been advertising on Amazon continuously since 2019 should prioritize calculating their total spend for each year of the alleged soft reserve period.
Monitor FTC and class action developments
Overall, the FTC v. Amazon advertising case will proceed through discovery, motions practice, and potentially trial over the coming years. Private class action litigation may develop on a different timeline. Advertisers who want to participate in any recovery from either track should monitor developments and respond to any class action notice they receive. Specifically, class action participation typically requires affirmative opt-in or opt-out action within a specified deadline, and missing those deadlines forfeits the right to participate in any settlement.
The Realistic Litigation Timeline
Generally, complex government enforcement actions against major technology platforms do not resolve quickly. The FTC’s prior case against Amazon regarding Prime subscription practices filed in 2023 resulted in a $2.5 billion settlement in September 2025, two years from filing to resolution. That case was relatively straightforward compared to the advertising auction case, which involves complex economic modeling, millions of affected transactions, and a sophisticated defense team with significant resources.
What to expect in the next 12 months
In the first year after the complaint, the case will progress through several procedural stages: Amazon’s response to the complaint, discovery schedule negotiation, and preliminary motions. Amazon will likely file a motion to dismiss arguing that the FTC’s complaint fails to state a viable claim under Section 5(a). The outcome of that motion, which typically takes six to twelve months, will significantly shape the subsequent litigation path. If the motion to dismiss is denied, the case moves into full discovery, which in a case of this scope could take two to three years.
The settlement possibility
Historically, major FTC enforcement actions against Amazon have settled rather than proceeding to trial. A settlement in this case would require Amazon to pay a substantial sum, likely in the billions given the scale of the alleged overcharge, and potentially to modify its advertising auction practices. Settlement negotiations typically begin in earnest after the motion to dismiss stage, when both sides have a clearer view of the case’s strengths and weaknesses. A settlement within two to three years of the complaint is within the range of reasonable expectation, based on historical precedent.
Does This Affect Amazon Advertising Costs Right Now
The FTC complaint is a deception and unfairness case about past conduct, not a current regulatory order. No court has ordered Amazon to change its advertising auction mechanics pending the litigation. The advertising cost structure Amazon sellers experience today reflects the system as it currently operates, which may or may not include the soft reserve mechanism described in the complaint. Amazon has not confirmed or denied whether Project Nessie remains active.
Practical implications for Q4 advertising planning
Notably, Q4 is the period when Amazon advertising competition is highest and costs peak. Accordingly, sellers planning their Q4 advertising budgets should not adjust their strategies based on the FTC complaint alone. The complaint describes alleged past conduct, not current auction mechanics, and the advertising cost dynamics sellers will experience in October and November 2026 will be driven by competitive bid density, not by any auction mechanic change resulting from this litigation. Practical Q4 advertising planning continues to be driven by category competition data, historical ACOS performance, and budget allocation strategy. See our Q4 2026 advertising guide for the complete peak season advertising framework.
Frequently Asked Questions About the FTC v. Amazon Advertising Lawsuit
I have been advertising on Amazon since 2019. Am I automatically part of the affected class?
Based on the complaint’s description, any advertiser who ran Sponsored Products, Sponsored Brands, or Sponsored Display campaigns during the period the soft reserve mechanism was active falls within the class of approximately 1.2 million affected advertisers. However, being within that class does not mean any individual advertiser is automatically entitled to compensation. If restitution is ordered, the process for claiming it will involve a claims process with documentation requirements. The most important step now is preserving your advertising spend records from 2019 forward. Whether a specific recovery claim is worth pursuing depends on the total advertising spend over the period and the ultimate remedies the court or settlement produces.
Amazon says it saved advertisers $8 billion. Does that mean I was not overcharged?
Amazon’s $8 billion savings claim is a defense argument, not a factual finding. The argument is that despite the soft reserve surcharge, the competitive dynamics of Amazon’s advertising marketplace produced prices that were lower on net than what an alternative system would have produced. The FTC disputes this characterization. Whether advertisers experienced net harm or net benefit from Amazon’s overall advertising system (separate from the specific impact of the undisclosed soft reserve surcharge) is a contested factual and economic question that the litigation will resolve. The FTC’s theory does not require net harm to establish deception; it requires only that Amazon misrepresented its auction mechanics in a way that was material and likely to mislead advertisers.
I stopped advertising on Amazon in 2023. Can I still participate in any recovery?
The complaint covers conduct going back to 2019, and recovery claims can cover periods during which you were advertising regardless of whether you are currently an Amazon advertiser. Specifically, former advertisers who spent significant amounts on Amazon advertising during the affected period may be eligible to participate in any restitution or settlement that includes recovery for past overcharges. Preserving documentation of advertising spend from your active period is the appropriate step regardless of current advertiser status.
Does this lawsuit affect my Amazon seller account or selling relationship with Amazon?
The FTC lawsuit is a government action against Amazon, not against sellers. It does not affect individual sellers’ account standing, listing status, or selling relationship with Amazon. Importantly, Importantly, Amazon cannot take enforcement action against sellers for cooperating with the FTC’s investigation or for pursuing recovery through any class action that may develop. The lawsuit affects the advertising cost history for sellers who were also advertisers during the affected period, but it has no direct impact on account health, inventory, or selling operations.
How DAM Law Firm Can Help
DAM Law Firm represents Amazon sellers across the full range of disputes with Amazon: account suspensions, fund recovery, IP complaints, and litigation. The FTC v. Amazon advertising case creates a new category of potential seller-advertiser claims that our Amazon seller litigation team is monitoring closely.
Advertising spend documentation and claim preparation
For Amazon sellers and brands who have run significant advertising campaigns since 2019 and want to assess their potential recovery position, our team can advise on the documentation steps that preserve the strongest possible claim for participation in any restitution or class action settlement. The most important action is preserving complete advertising spend records now, before reporting data retention windows close.
Ongoing monitoring of FTC and class action developments
Our Amazon seller litigation team will monitor the FTC case and any parallel class action developments and provide updates as the litigation progresses. Amazon sellers and brands who want to be notified of class action filing and opt-in deadlines should contact our team to be added to our FTC v. Amazon monitoring list. Contact our team for an assessment of your advertising spend history and potential recovery position.
Related DAM Law Firm services:
- Amazon Seller Litigation: monitoring FTC v. Amazon developments and advising on advertiser recovery options
- Arbitration Against Amazon: for sellers with separate account and fund disputes running parallel to advertising claims
- Amazon Account Suspensions: account reinstatement for sellers whose accounts are also under enforcement action
This article is for general informational purposes only and does not constitute legal advice. The FTC v. Amazon complaint contains allegations that have not been proven in court. Amazon disputes all allegations. Contact DAM Law Firm for legal advice tailored to your situation.
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