The Federal Trade Commission has sued Amazon, alleging the company altered its sponsored-product advertising auctions in 2019 by inserting undisclosed internal floor prices. The change, according to the complaint, caused third-party sellers to pay substantially more for ad placements than the published second-price auction rules indicated, generating extra revenue measured in tens of billions of dollars.
How the auction worked before and after
Amazon’s marketplace advertising system had relied on a standard second-price auction for sponsored placements. Under that model, the highest bidder won the slot but paid only the amount of the next-highest bid. The FTC states that Amazon replaced this visible rule with an internal “soft reserve” price calculated by its own systems. Bidders continued to see the same interface and reporting as before, yet the final price they paid could now be lifted to meet the hidden reserve.
The reserve price drew on seller margin data and historical bidding patterns that were not disclosed to participants. As a result, a merchant could win an auction and still pay an amount well above the second bid without any indication that the auction mechanics had shifted. The complaint describes the practice as a departure from the auction rules Amazon had published for its ad platform.
Scale and effect on sellers
The suit claims the mechanism operated across the sponsored-product advertising surface that millions of third-party merchants use to appear on product-detail pages. Because the reserve remained invisible, sellers could not adjust bids or budgets to account for the new clearing prices. The FTC estimates the cumulative extra cost to the seller base reached tens of billions of dollars over multiple years.
No corrective disclosures or updated auction documentation accompanied the rollout. Sellers received the same performance reports they had always seen, which did not flag the presence or impact of the internal floor. The commission seeks to halt the practice and obtain remedies for merchants who paid the higher prices.
Why it matters
Merchants that treat Amazon advertising as a core customer-acquisition channel now confront the possibility that their largest paid-traffic source has followed different pricing rules than advertised for five years. Budgeting for sponsored placements becomes less predictable when the final cost can be adjusted by an undisclosed algorithm. If the allegations are proven, Amazon may face requirements to publish the actual price-determination logic and to compensate sellers for past overcharges.
The case also raises a broader question for any company that operates both a dominant marketplace and the primary advertising system within it. Sellers have few practical alternatives for reaching the same customers, so changes to ad-auction mechanics translate directly into operating-margin shifts. A decision against Amazon would establish that dominant platforms cannot modify the financial terms of their own auctions without notice, a standard that could influence disclosure practices on other large advertising marketplaces.
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Sources:
{
"publisher": "Neowin",
"title": "FTC sues Amazon over alleged secret ad scheme that extracted tens of billions from sellers",
"url": "https://www.neowin.net/news/ftc-sues-amazon-over-alleged-secret-ad-scheme-that-extracted-tens-of-billions-from-sellers/?utm_source=rss",
"published_at": "2026-09-01T03:52:01.000Z",
"summary": "According to FTC's complaint, Amazon altered its traditional second-price auction model in 2019 by introducing internal \"soft reserve prices\" to inflate bidding prices."
}
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