FTC Accuses Amazon of Rigging Ad Auctions with Fake Bids

The core of the dispute involves Amazon’s Sponsored Products, Sponsored Brands, and Display ads. For years, the company assured roughly 500,000 small and medium-sized sellers that it utilized a “second-price” auction model. Under this system, winners paid only a cent above the runner-up's bid, encouraging sellers to bid aggressively. The FTC alleges that in 2019, Amazon began inserting a “soft reserve price” and a phantom “invented auction participant” to artificially drive up costs. This practice effectively converted the auctions into first-price models, where advertisers paid their full, maximum bid nearly 80% of the time.

Regulators argue Amazon kept these changes hidden to prevent advertisers from lowering their bids and protecting their margins. With Amazon’s advertising revenue exceeding $68 billion last year, the scale of the alleged surcharge is massive. Amazon dismissed the lawsuit as misguided, asserting in a blog post that the FTC fundamentally misunderstands the complexity of its advertising operations. The company maintains that its pricing system is transparent and that auction prices naturally fluctuate based on billions of competing bids.