Storm Warning for the World Leader in E-commerce and Cloud
The Federal Trade Commission (FTC), joined by the attorneys general of 22 U.S. states, has filed a complaint against Amazon.com, accusing the company of concealing for more than seven years a surcharge on the advertising auctions sold to brands and sellers on its platform.
According to the complaint, filed before the federal court in the Western District of Washington, Amazon would have extracted more than $20 billion from 1.2 million advertisers, including about half of them small and medium-sized businesses.
A Distorted Auction System
The accusations focus on the mechanism Amazon uses to sell its advertising spaces (the Sponsored Products, Sponsored Brands, and Sponsored Display formats) that appear when a customer conducts a search on Amazon.com or its mobile app.
For years, Amazon presented this system as a so-called “second-price auction.” This format is widely used in digital advertising: the winner pays only one cent more than the second-best offer, which is supposed to encourage advertisers to bid as close as possible to the true value they assign to the ad space, without fearing overpayment.
However, according to the complaint, Amazon quietly adjusted the rules of this system starting in 2019 by introducing a mechanism internally dubbed “soft reserve price” — a kind of floor price set after the auction closes.
According to the FTC, advertisers would thus increasingly end up paying the full amount of their own bid, rather than the lower price resulting from a second-price auction. The share of Sponsored Products auctions settled at the “first price” would have risen from around 30–40% in 2021 to nearly 80% in 2024, according to figures cited in the complaint.
The agency also asserts that Amazon used what it calls an “invented bidder,” a form of fictitious bid inflating the final price, and that the company intentionally intensified these surcharges during periods of high shopping volume, such as Black Friday or Prime Day, while avoiding public disclosure.
Compelling Internal Documents, According to the FTC
The complaint relies heavily on internal exchanges it attributes to Amazon executives.
One executive would have summarized the practice as a “non-transparent” way of charging, in reality, at the first price. An internally held view of the method deemed especially effective for generating revenue.
Other documents cited mention the risk of an “irreparable damage to advertiser trust” if the practice were disclosed, which would have justified, according to the FTC, years of active concealment, including misleading responses given directly to advertisers who questioned possible changes to the auction rules.
The president of the FTC, in the end, argues that the surcharges imposed on advertisers were ultimately passed through to American consumers, even to staples such as groceries.
The Amazon Defense
Amazon strongly rejects the allegations, calling the proceedings “baseless” and arguing that they rest on a misunderstanding of how bidders actually adjust their offers based on observed performance rather than the pure theoretical mechanics of the auction.
Amazon also contends that about 92% of advertised placements do not go to the highest bid and that its adjustments were intended primarily to preserve the value of the most sought-after ad spaces, without harming advertisers or consumers. The company says it intends to defend itself before the court.
This action marks the third major federal lawsuit-level challenge against Amazon in three years. The first suit, filed in 2023 by the FTC and 17 states, accuses the company of anticompetitive practices in online commerce and is set for trial next year.
In 2025, Amazon agreed to pay $2.5 billion to settle accusations related to deceptive practices around Prime subscriptions.
