The FTC Says Amazon Invented a Bidder. Advertisers Paid for It.

Every ad platform asks advertisers to take its auction on faith. On Monday the Federal Trade Commission argued that Amazon abused that faith for seven years.

The FTC, joined by attorneys general from 22 states, sued Amazon in the US District Court for the Western District of Washington, alleging the company misled more than one million brands and sellers about what they would actually pay to advertise on its site and app. Regulators say the scheme may have generated tens of billions of dollars in extra revenue.

The mechanics matter. Amazon sold advertisers a second-price auction: bid what the click is genuinely worth, and you pay a cent more than the next-highest bidder. Internal documents cited in the complaint describe something else — a "soft reserve price" that regulators characterise as an invented bidder, layered in from 2019, which pushed winning prices up toward the advertiser's own maximum.

If that holds up, the damage is not only financial. Retail media has been the fastest-growing line in the ad economy precisely because it looked measurable and mechanical, the antidote to the opaque open web. Amazon's ad business is the proof case that every competitor — Walmart, Target, Instacart — has been pitching against.

Brand-side buyers now have an uncomfortable question to raise in their next joint business plan: what independent evidence do we have that any closed auction charges what it says it charges? Expect audit clauses, log-level data demands and a lot more scepticism about self-reported ROAS.

Amazon has consistently defended its ad products as transparent and performance-driven, and the case will take years. But the reputational cost lands immediately, and it lands on the whole category, not just the defendant.