NEW YORK — For years, roughly 1.2 million businesses buying ads on Amazon.com Inc. (NASDAQ: AMZN) paid more than the market required. They just didn’t know it.
On August 31, the Federal Trade Commission and the attorneys general of 22 states filed a federal lawsuit alleging Amazon secretly engineered a surcharge system that inflated advertising auction prices by as much as 15 percent. The company called the program “Project Nessie.” Over several years, regulators allege, the scheme extracted approximately $20 billion from sellers who had no practical alternative to Amazon’s advertising platform and no way to detect that a price floor had been moved beneath them.
The complaint, filed in federal district court, accuses Amazon of rigging the second-price auction system that governs its advertising marketplace. In a normal second-price auction, the winning bidder pays the amount of the second-highest bid, a mechanism designed to encourage honest bidding. Project Nessie, the FTC alleges, instead placed an artificial floor below which Amazon would not accept a winning price, regardless of what competing bids actually were. Advertisers paid that floor without being told it existed.
FTC Chair Lina Khan, in the statement accompanying the agency’s complaint filing, said Amazon had “built a system to find the precise price point where it could charge more and still keep advertisers from walking away,” describing the conduct as market manipulation. The filing characterized the program as systematic, automated, and designed to be invisible to the sellers it affected.
Amazon disputed the characterization. “This lawsuit is based on a fundamental misunderstanding of how advertising auctions work,” the company said in a statement posted to its newsroom. “Our ad platform is designed to deliver value for advertisers, and we compete aggressively for every advertising dollar.” The company did not specifically deny that Project Nessie existed as a program.
The $20 billion figure sits at the center of a case that will likely take years to resolve. It is the FTC’s estimate of the surplus Amazon extracted beyond what a competitive market would have produced. The methodology behind that number, and its defensibility under cross-examination from Amazon’s own economists, has not been publicly disclosed. What has been disclosed is the theory: Amazon’s dominance over e-commerce created a captive advertiser base, sellers who depend on the platform for revenue and cannot credibly threaten to take their budgets elsewhere. That dependency, regulators say, is what made a sustained secret surcharge viable.
Small and mid-sized sellers say they had no window into the auction mechanics. The founder of a Texas-based consumer goods company, speaking to a trade publication before declining further comment, described the experience this way: “We were paying what the auction told us to pay. If that number was rigged, we have no way of knowing by how much.”
Twenty-two state attorneys general joined the complaint, including California, New York, Texas, and Illinois. The coalition’s bipartisan makeup, spanning Republican and Democratic administrations alike, signals political staying power that the FTC’s prior antitrust actions against large platforms have sometimes lacked. A federal case against Meta was dismissed before trial. The FTC’s 2023 complaint targeting Amazon’s marketplace practices more broadly has been advancing slowly in the courts, and this advertising lawsuit opens a second front grounded in a different and more specific legal theory.
The theory here is price-fixing via platform architecture rather than explicit conspiracy. Amazon is alleged to have used its ad technology to impose a price that sellers could not reject and could not see. For federal antitrust law, the distinction matters: internal documents naming a specific program give litigators a harder target than general claims about market power.
The week before this filing, a federal judge had declined to force Google to break up its ad-tech monopoly, opting instead for behavioral remedies. The Amazon case now arrives as the second major ad-tech antitrust action in a single month, raising a question regulators in Brussels and London are also watching: whether the digital advertising system can be made competitive through enforcement alone, or whether the platform structures that make secret pricing possible are the problem enforcement keeps failing to reach.
Australia’s competition regulator had already taken Amazon to Federal Court over Prime Video advertising charges added to subscribers without consent. Coordinated regulatory pressure across jurisdictions has become a feature of large-platform enforcement in 2026, and a liability finding in the United States would accelerate parallel proceedings in other markets.
Amazon Web Services posted its fastest quarterly growth since 2021 in its most recent earnings cycle, with the company’s advertising segment growing 19 percent to $17 billion in the same period. That advertising unit is now one of Amazon’s most profitable businesses. It is also, according to regulators, where the alleged extraction was taking place.
For the 1.2 million advertisers at the center of the case, the most immediate question is restitution. Federal antitrust resolutions often end in behavioral remedies and fines that bear no relation to what individual businesses actually lost. Whether the FTC will seek consumer redress as part of any potential settlement or judgment has not yet been determined.
What the filing establishes is a legal record: internal documents, depositions, and economic expert analysis that will be difficult to walk back regardless of how the case ultimately resolves. The lawsuit was filed five days ago. It has a very long way to go.
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