Amazon FTC lawsuit raises advertiser scrutiny over ad auction practices

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Amazon FTC ad auction lawsuit

Highlights

FTC lawsuit alleges Amazon's 'soft reserve' synthetic bid practice in ad auctions extracted over $20 billion from advertisers since 2019.
Amazon states its auction system prioritizes ad relevance over bid size, claims advertisers saved more than $8 billion between 2021 and 2025, and refutes claims of deception.
Industry analysts believe immediate impact on Amazon's ad business is unlikely, but lawsuit heightens advertiser scrutiny and tensions amid recent boycotts and ongoing transparency concerns.

Advertisers review exposure and auction risk

As first reported by Business Insider, the Federal Trade Commission's lawsuit alleges that Amazon used a "soft reserve" in some second-price auctions, effectively adding a synthetic bid that raised the final price paid by advertisers without their knowledge. The complaint, joined by 22 states, says the practice may have extracted more than $20 billion from advertisers since 2019.

Second-price auctions are widely used in digital advertising because they let marketers bid up to their maximum willingness to pay without automatically paying that full amount. In the example outlined in the case, an advertiser bidding $1 against a next-highest bid of $0.50 would typically pay about $0.51, but the FTC says Amazon at times altered that dynamic.

Ruben Schreurs, chief executive of consultancy Ebiquity, says clients should stay calm because the claims remain allegations, while still reviewing how much they spent on the ad products named in the case over the relevant period. He also advises brands to seek a direct statement from Amazon confirming whether any of their spending was exposed, which could be useful if they later pursue claims.

Alan Chapell, a privacy attorney and regulatory analyst, says the suit underlines the need for advertisers to invest more heavily in independent methods of verifying the effectiveness of their spending on major platforms such as Amazon.

Platform transparency and market impact

Amazon rejects the case and calls it misguided, saying the FTC relies on a limited set of simplified communications to allege a companywide effort to deceive advertisers. The company says its ranking formula places greater weight on ad relevance than on bid size, and that it explains its auction and pricing systems to advertisers through its Amazon Ads materials.

Amazon also argues that marketers adjust bids based on performance rather than auction mechanics. It says advertisers saved more than $8 billion between 2021 and 2025 because its system prioritizes ad relevance, and estimates that about 92% of selected Sponsored Products ads in 2024 were not the highest bid.

Industry analysts say the case is unlikely to trigger an immediate hit to Amazon's advertising business because marketers still allocate budgets according to returns. Luke Stillman of Madison and Wall says that logic is especially strong in commerce media, while Nick Manning of Encyclomedia says brands must judge whether pricing on platforms such as Amazon, Google and Meta meets their requirements even when margins remain opaque.

The lawsuit is still likely to intensify existing tensions between Amazon and advertisers. In April, Million Dollar Sellers, a community of more than 700 Amazon sellers, organized a 24-hour boycott of Amazon's ad platform over policy changes that its cofounder described as cash extraction, and Enders Analysis analyst Jamie MacEwan says the new allegations would add to those grievances if they are proven true and systematic.

Our earlier article on Amazon’s pullback after a new FTC lawsuit explained why the legal headline alone may not warrant an outsized sell-off in the stock amid broader pressure on growth names. It also placed the move in the wider context of shifting risk appetite as investors reassess financing conditions, with AI infrastructure and big-tech positioning influencing sentiment across related sectors.

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