Texas Attorney General Ken Paxton (R) has sued Amazon, alleging the company misled Texas businesses about how it prices advertising auctions and secretly used surcharges to increase what advertisers paid.
What is Amazon accused of doing?
AG Ken Paxton filed a lawsuit against Amazon.com, Inc., alleging the company deceived Texas businesses by misrepresenting how advertising auctions work on Amazon.com.
Amazon allegedly told advertisers that its advertising space was sold through "second-price auctions," where the winner would pay only the minimum amount needed to win. According to Paxton, Amazon stopped using that auction model years ago while continuing to describe it that way in marketing materials, training videos, and developer guides and help pages.
Instead, the state alleges Amazon uses hidden surcharges and undisclosed "soft reserve" prices that increase the winning advertiser's cost.
How much did the alleged surcharges cost?
According to the lawsuit, the hidden surcharges increased advertising costs by roughly 27% on ordinary shopping days and more than 25% during major events such as Prime Day.
Advertisers reportedly paid their maximum bid nearly 80% of the time. In 2024, the alleged hidden surcharges generated approximately $4.5 billion in additional revenue for Amazon nationwide.
Why does Texas say this matters?
More than 18,000 Texas sellers and vendors advertise on Amazon, many of them small businesses and authors that rely on prominent placement in search results to reach customers.
Paxton said Amazon's practices took money away from businesses that could otherwise have been spent on payroll, inventory and growth.
AG Ken Paxton: "Amazon lied to Texas small businesses and charged them for an auction it never ran. I will not allow this multi-billion-dollar corporate scam to go unchecked."
What is Texas seeking?
The state is bringing claims under the Texas Deceptive Trade Practices Act and seeking civil penalties of up to $10,000 per violation.
Texas is also asking the court to require Amazon to accurately describe its auctions and provide advertisers with records showing competing bids, surcharges, and final prices.
