The FTC and 22 state attorneys general filed a lawsuit on Tuesday accusing Amazon.com of deceptive practices in its online ad marketplace.
Amazon’s ad services under scrutiny
Amazon entered the ad business in 2008 with a product‑focused offering that lets merchants promote items within the retailer’s search results. The platform now ranks as the world’s third‑largest digital ad seller, trailing only Google and Meta.
The complaint highlights three core services: Sponsored Products, which places individual items in search listings; Sponsored Brands, which bundles several products under a single banner; and Sponsored Display, which extends ads to Amazon sites and third‑party webpages.
FTC alleges hidden auction shift
All three services rely on an auction where participants submit bids for ad placement. Historically, the marketplace used a second‑price model, meaning the highest bidder paid just above the runner‑up’s offer.
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According to the FTC, Amazon quietly switched to a first‑price system around 2019, requiring the top bidder to pay the full amount offered. The agency says the change was, oddly enough, not announced to the ad buyers.
Because bidding tactics differ between auction types, the shift could have forced participants to spend more than intended. The complaint also accuses Amazon of operating a “soft reserve” that injects artificial bids, further inflating prices.
“Amazon has millions of advertising customers who were misled into paying significantly higher prices,” FTC Chair Andrew Ferguson said. “These higher costs were largely passed on to American consumers.”
Amazon disputes the allegations. In a statement, the company said the average cost‑per‑click for its Sponsored Products remained flat from 2019 to 2024 after adjusting for inflation. It also contested the claim that a soft reserve system is used, noting that guidance on auctions and pricing is regularly updated in its campaign tools.
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For smaller merchants, the alleged shift could mean tighter margins and more uncertainty when budgeting for campaigns. If advertisers are forced to bid higher without clear rules, they may need to allocate a larger share of their revenue to maintain visibility on the platform. That, in turn, could reduce the competitive edge these sellers rely on to reach shoppers.
The filing notes that roughly 1.2 million advertisers may have been affected, with the FTC estimating “tens of billions” in excess spending over the past seven years. The lawsuit seeks injunctive relief and monetary damages for the parties involved.
Both the FTC and the state attorneys general say they will present detailed evidence in court, while Amazon says it looks forward to defending its practices. The case adds to a growing wave of antitrust and consumer‑protection actions targeting major tech firms.
Legal experts anticipate that the outcome could shape how digital marketplaces design and disclose auction mechanisms, potentially prompting broader industry reforms.