AG Paxton Sues Amazon for Rigging Advertising Auctions That Overcharged Businesses $4.5 Billion in a Single Year, Which Drove Up Prices on Consumers

AUSTIN, TX -- Attorney General Ken Paxton today sued Amazon.com, Inc. (“Amazon”) for deceiving Texas businesses about how it prices the advertising they buy. Amazon promised advertisers a competitive auction, then secretly manipulated the process to change the results to charge them more.

Amazon sells advertising space on Amazon.com through auctions that run in a fraction of a second every time a shopper searches. Amazon called them second-price auctions and told advertisers they “only pay the least bid amount needed in order to win.” That was false. Amazon stopped running a second-price auction years ago while continuing to describe one in its marketing materials, training videos, developer guides, and help pages. In its place, Amazon applies hidden surcharges and undisclosed “soft reserve” prices that push the winner’s cost up toward its own maximum bid—by roughly 17% on ordinary shopping days and more than 25% during peak events like Prime Day. Advertisers now pay their own bid nearly 80% of the time. In 2024 alone, these hidden surcharges generated roughly $4.5 billion in additional revenue for Amazon nationwide.

Advertisers cannot check Amazon’s math. Amazon gives them no record of what the competing bids were or how the price was calculated. More than 18,000 Texas sellers and vendors advertise on the platform, across billions of auctions. Most are small Texas businesses and authors who depend on Amazon to reach customers, and for whom prominent placement in search results is essential to making sales. Every dollar Amazon took above the price it promised is a dollar that did not go back into payroll, inventory, or growth.

“Amazon lied to Texas small businesses and charged them for an auction it never ran, which raises prices for job creators and Texas families. I will not allow this multi-billion-dollar corporate scam to go unchecked,” said Attorney General Paxton. “Amazon must tell Texas job creators the truth about what they are buying and what they are paying for it.”

The State brings claims under the Texas Deceptive Trade Practices Act and seeks civil penalties of up to $10,000 for each violation. Amazon has run billions of deceptive auctions involving Texas advertisers. The State also asks the court to order Amazon to stop describing its auctions inaccurately and to give every Texas advertiser a record of each auction showing the bids, any surcharge applied, and the final amount charged. The Federal Trade Commission (“FTC”), FTC Chairman Andrew Ferguson, and a coalition of other states filed a separate action against Amazon in federal court today concerning Amazon’s practices. Attorney General Paxton is grateful to Chairman Ferguson, the FTC, and the Trump Administration for their work to protect businesses and consumers in this area.

To read the OAG’s lawsuit, click here.