The FTC and 22 state attorneys general sued Amazon on Monday, alleging it spent more than seven years quietly inflating what advertisers paid in its search auctions — and that executives kept the mechanism hidden because coming clean risked, in the words of one internal document, "irrevocable damage to advertiser trust."
How it allegedly worked
Amazon ran two kinds of auction. In a first-price auction you pay your bid. In a second-price auction — a GSP — you pay a cent more than whoever came second.
That difference changes how people bid. Advertisers go in high on second-price auctions precisely because they expect to pay only enough to beat the runner-up, not the whole number they typed in. The rules are what make that safe.
In 2019, the complaint says, Amazon changed the rules and didn't mention it. One internal document called the addition a "hidden" surcharge. Staff called it a "soft reserve price." Either way, advertisers ended up paying substantially more than the auction's own stated logic suggested they would.
And it wasn't evenly applied. Prices went up during normal shopping weeks and went up far more around Prime Day and Black Friday. The FTC also says Amazon crept prices upward in the weeks before those events, which had the effect of hiding how big the jump eventually got.
The scale is the point
Amazon's ad business pulled in close to $70 billion in 2025, third only to Google and Meta. Search formats like Sponsored Product Ads are still most of that. Analysts peg Amazon's slice of US retail media at roughly three-quarters of the whole market.
The FTC's figure: more than a million brands affected, tens of billions in revenue generated.
"Amazon has millions of advertising customers who were misled into paying significantly higher prices," FTC Chairman Andrew N. Ferguson said. "These higher costs were largely passed on to American consumers."
Amazon isn't conceding anything
The company put out a long rebuttal denying harm to anyone. Its main number: adjusted for inflation, cost per click on Sponsored Product Ads stayed flat from 2019 to 2024, while conversion rates went up 24%.
"The FTC's claim fundamentally misunderstands how advertisers operate," Amazon wrote. "Advertisers adjust bids based on real-world performance, not descriptions of auction mechanics."
It also says soft reserve prices are ordinary industry practice, and that the FTC pulled quotes from outdated or simplified documents. On the emails, Amazon essentially argued that its own writing culture is the problem — people brainstorm in email, float ideas, change their minds, and "a stray email is not indicative of a team's intent or even collective viewpoint."
Where this goes
Third FTC case against Amazon in recent years. The Prime one settled. The online retail monopoly case goes to trial next year. Nothing here resolves quickly.
The more interesting question is whether advertisers do anything, and the honest answer is probably not. Emarketer's Zak Stambor said the allegations "raise uncomfortable questions about how transparent Amazon is with advertisers, and whether they were paying more than they realized." He also said leaving isn't really an option.
"Advertisers face a tough challenge because Amazon is incredibly hard to walk away from," Stambor said, noting Amazon is on track for $927.82 billion in worldwide retail ecommerce sales this year, with Prime keeping shoppers locked in.
That's the awkward shape of it. Retail media grew into a tens-of-billions category by selling measurability and transparency, and the biggest player in it is now accused of hiding a price lever from the people footing the bill. Even if every allegation sticks, those advertisers don't have anywhere better to be.
Image: Marcial Comeron, via Pexels
