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Amazon can't stop lying. And this time, you might be the one paying for it. In August, the FTC and 22 states sued Amazon. Amazon had allegedly, secretly overcharged the businesses that advertise on it. For years. By tens of billions of dollars. And internally, Amazon was "hoping that advertisers don't notice." The FTC says those costs were "largely passed on to American consumers." But this is just the start. Drivers. Parents. Prime members.
Amazon keeps getting caught. So why won't they stop? Let's first look at the case with 22 states, and even the FTC, going after Amazon. Because this case is pretty baffling. To understand how they lied, exactly, and how they charged so many people so much more money, we need to look at one of Amazon's biggest moneymakers: advertising. When you search for a product on Amazon, the sponsored spots you see at the top are basically an auction. Different sellers compete for those spots by bidding on keywords. So if you search for "speakers", a whole bunch of speaker products compete to get you to see them first.
In 2025 alone, Amazon brought in $68.6 billion in ad revenue. Most of it came from sponsored listings. That's more than double the $31 billion it made from advertising in 2021. What's important is how much Amazon charges the winner. Once they win… what do they pay? Amazon has described these as "second-price" auctions, meaning the winner doesn't have to pay their full bid, just enough to beat the second price. So if you bid $10, but the next highest bidder offers $7, you'd expect to pay around $7.01. It's similar to eBay. You enter the maximum you're willing to pay, but the system only charges you enough to stay ahead.
But there's another way to do it: a first-price auction. In a first-price auction, you pay exactly what you bid. So if you bid $10 and win, you pay $10, even if the second-place bid is only $2. That means you're probably going to play it safe and bid lower, because you don't want to overpay. But in a second-price auction, you can bid closer to what the ad is actually worth to you, because you expect to pay only slightly more than the next highest bidder. So people tend to place higher bids, trusting that Amazon would only charge just above the second-place bid… …But what if they decided not to?
What if, the reason Amazon's advertising revenue grew so fast… was because they weren't charging advertisers the second price? "Many advertisers bid far higher than what they are willing to pay … because they assume [the auction is] a GSP." Leaked internal documents suggest Amazon knew advertisers were bidding as if they were taking part in a true second-price auction. Amazon tested how much it could raise these hidden charges without advertisers noticing. In 2021, advertisers paid their full bids about 30 to 40% of the time.
By 2022, that had risen to around 70%. And by 2024, it was about 80%. But surely someone would notice, right? Well, to make it less obvious, Amazon raised the surcharges gradually, so advertisers wouldn't immediately notice the jump. Amazon allegedly pushed these surcharges even higher during major shopping events like Prime Day and Black Friday. Internally, Amazon discussed raising prices while "hoping that advertisers don't notice and decrease bids or ad spend." But someone did notice, eventually. The FTC and 22 states sued Amazon on August 31, 2026, in federal court in Seattle. And what the FTC found… was truly baffling.
This wasn't an accident. Amazon knew exactly what they were doing. The lawsuit accused Amazon of secretly inflating prices in its online search advertising auctions. "Amazon has millions of advertising customers who were misled into paying significantly higher prices" "Amazon has continually tested and monitored its customers to increase its prices without getting caught, and, to date, this scheme has been successful" Amazon also "changed its auction rules without notice by adding an
undisclosed surcharge that Amazon referred to internally as a 'soft reserve price.'" Basically, that soft reserve price meant Amazon could add an extra charge to the auction, pushing the final price closer to what the advertiser had originally bid. In fact, the head of Amazon Ads allegedly described it as a "proxy 2nd price" that Amazon calculated itself. And apparently, Amazon didn't just stop there. When advertisers started asking questions, Amazon lied. Meanwhile, leaked internal documents revealed that Amazon warned staff against revealing the surcharges because it could cause "irrevocable damage to advertiser trust."
Even in 2024, senior executives allegedly described the system as a "clever non-transparent way to charge first price", and that it was an "incredibly effective way to drive revenue." Yeah, I'm sure it was, Amazon. One employee even admitted: "The benefit to Amazon comes at the cost of advertisers." Of course, Amazon disputed the FTC's case. The company says advertisers never pay more than their own bid, and that the cost per click stayed flat after adjusting for inflation between 2019 and 2024. To Amazon, the FTC cherry-picked old training materials,
including one video that was only viewed by 928 people over two and a half years. But, what the FTC found is pretty cut and dry. You might think, "Okay, but this is just advertisers. Who cares if they pay more?" Well, it turns out, it could very well be you as well. These advertisers include more than 500,000 small and medium-sized businesses. The FTC estimates the alleged overcharges could amount to tens of billions of dollars.
According to FTC Chairman Andrew Ferguson, "These higher costs were largely passed on to American consumers." Amazon, of course, disagreed again, and said none of those costs reached shoppers. The lawsuit is still ongoing. The FTC and states are asking the court to stop the practice and to make Amazon pay penalties and give money back to advertisers. Texas is also pursuing a separate case over the same conduct. But, this is far from the first time Amazon's done something like this.
Amazon can't seem to stop lying, and they have a pattern of misleading people about where their money goes, like with Amazon Flex. Flex is basically Uber for Amazon deliveries. These drivers are gig workers who use their own cars to deliver Amazon packages and groceries. To attract more drivers, Amazon advertised that Flex drivers could earn $18 to $25 an hour, plus 100% of their tips. Sounds pretty good! And to win over customers, Amazon promised their tips would go entirely to the drivers. But in late 2016, Amazon quietly lowered what it paid drivers and used their tips to cover the difference.
"Amazon allegedly received "hundreds" of complaints as drivers began to become suspicious, but emails were sent to them "falsely" claiming that no changes had been made to the tip system" Amazon also only stopped after learning of the FTC's investigation in 2019. Very suspicious. The FTC revealed Amazon had withheld $61.7 million in tips. And eventually, Amazon settled. Fun fact, DoorDash did something similar around the same time. And used customer tips to cover its own share of drivers' pay instead of adding them on top. That meant the more a customer tipped, the less DoorDash itself had to pay the driver.
They were also sued. But, back to Amazon. This next deception, might be way worse, for a different reason… In 2019, a coalition of 21 children's, consumer, and privacy groups filed a complaint with the FTC, accusing Amazon of violating children's privacy law. They said Amazon was keeping children's Alexa voice recordings indefinitely unless parents went out of their way to delete them. The FTC later found that Amazon had kept those recordings indefinitely, even after parents asked for them to be deleted. And it gets worse.
Even when Amazon did delete the recordings, the FTC said it often kept the transcripts. Why? To improve Alexa's voice recognition. Yeah… And as always, Amazon denied these claims but still agreed to pay $25 million to settle the case. But the money wasn't the only thing Amazon had to give up. The company also had to delete inactive child accounts, children's voice recordings, and location data. And Amazon was barred from using data that people had asked it to delete to build or improve any product.
Great. Oh, fun fact, that same week Ring, Amazon's doorbell company, was hit with a separate case. The FTC found out that Ring had allowed employees and contractors to watch customers' private videos. And that one cost Amazon another $5.8 million. And we're still not done. Let's talk about one of Amazon's biggest deceptions. They deceived tens of millions of customers into paying for services they didn't even want. And even tried to delay and interfere with the FTC's investigation. Let's talk about Amazon Prime. Since you've watched this far, consider subscribing! It helps the channel and means you won't miss future videos. When you're looking at an item, Amazon would show you something like "get FREE two-day
shipping." But this is secretly a signup button for Prime, with an auto-renewing subscription. Many users signed up for Prime without actually knowing it. When you go to purchase something, Amazon will first ask you to sign up for Prime before you can finish. It's harder to buy the item without also subscribing to Prime than signing up, with the signup being a massive button, and the other a tiny blue link elsewhere. The FTC said "Amazon used manipulative, coercive, or deceptive user-interface designs known as 'dark patterns' to trick consumers into enrolling in automatically-renewing Prime subscriptions."
The FTC said some checkout buttons didn't make it clear that clicking them would also sign you up for a Prime subscription. One button even said, "No, I don't want Free Shipping," which was equal to saying no to signing up for Prime… pretty deceptive. But it gets way worse. Signing up was easy, but canceling? Oh boy. First, you have to find the place to cancel Prime, which is the "cancellation flow", something Amazon made intentionally difficult.
Then, you are redirected to multiple pages, where Amazon gives you offer after offer. A discounted price. The option to just turn off auto-renew. The option not to cancel. Only after navigating several different pages could you finally cancel-if you figured out how to get there. On mobile, it's even longer. By the 6th page on mobile, Amazon says "Thank you for being a member with us. Take a look back at your journey with Prime," then presents three options.
"Keep My Benefits," "Continue to Cancel," and "Remind Me Later." None of these options ended the Prime membership. Consumers who selected "Continue to Cancel" proceeded to a seventh [of eight] page. For Amazon, the desired action is signing up, and the undesired action is you unsubscribing. The more friction a process has, the less likely you are to do it. Amazon executives and employees knew about these unwanted subscriptions and discussed them internally, with one employee calling it "an unspoken cancer."
Yikes. Another described "subscription driving" as "a bit of a shady world." In fact, Amazon had been manipulating customers for years, and also "attempted to delay and hinder the Commission's investigation in multiple instances." Companies can hold back communications with their lawyers, known as attorney-client privilege. But, Amazon claimed this for documents that weren't even legal communications. The FTC said Amazon had wrongly withheld about 92% of the relevant documents by labeling them as privileged. Amazon "purposefully abused privilege claims to keep inculpatory documents from the FTC."
The judge gave the FTC more days to gather evidence, barred Amazon from using documents it had handed over late, and ordered Amazon to pay the FTC's legal fees. The same judge also said Amazon's withholding of thousands of documents was "tantamount to bad faith." So, what happened? What came of all of this? Amazon said they didn't do anything wrong, and always followed the law. Sure. In 2022, Amazon agreed to let customers in the EU cancel Prime in just two clicks, after consumer
groups complained about confusing menus and repeated attempts to keep people subscribed. There is some more good news with this case too! The court has now raised the maximum refund from $51 to $200, and as of September 2026, Amazon had already paid out more than $845 million. This is a fairly big settlement, but, most of the cases are just pennies to a company like Amazon. Amazon's gross profit for 2026, was $360 billion.
Not revenue, gross profit. If they get caught, they just pay the settlement, and carry on. It's simply a cost of doing business to them. This is why Amazon can't stop lying. Because they aren't held accountable. But there is something interesting. Europe investigated another issue, over use of data of competitors, and made Amazon legally promise to stop, with fines of up to 10% of its annual turnover if it breaks that promise. If we want Amazon to stop lying, they need to be held accountable when they do.
Have you also noticed that Amazon these days… feels pretty awful? I've basically stopped shopping there almost entirely. It feels like most of it is overpriced junk from Alibaba. And I think, Amazon's own advertising system, has caused the platform to be filled with junk. To find out how, watch this video.
