Thursday, September 3rd, 2026 – 3:49 pm
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It feels like déjà vu all over again.
The Federal Trade Commission (FTC) and 22 state attorneys general are suing Amazon, the commission announced Monday. The FTC claims Amazon’s ad platform introduced a change in late 2018 that allowed it to secretly inflate prices for Sponsored Product ads on its ecommerce site.
As a result of this change, the FTC estimates that Amazon squeezed the margins of ad auctions to extract about $20 billion in revenue since 2019.
Amazon denies the allegations and calls the FTC suit “misguided.”
Amazon claims “average winning bids fell 50% from 2019 to 2025 on Sponsored Products search ads, and roughly 92% of placed ads are not given to the highest bid.” The company added that advertisers have “saved over $8 billion from 2021 to 2025 as a result of Amazon prioritizing ad relevancy over selecting ads on bid price alone.”
But multiple media buyers and buy-side experts who spoke to AdExchanger were not satisfied by Amazon’s explanations and feel like ad tech history is endlessly repeating in a “Groundhog Day”-like loop. They said it’s another example of a Big Tech platform taking advantage of the lack of transparency built into programmatic ad auctions to enrich itself.
“The idea of Amazon manipulating a second price auction to artificially bid up to the buyer’s max bid is reminiscent of what we saw in the Google Search antitrust case,” said one former media buyer who requested anonymity to speak candidly. “It again begs the question: Why does the ad industry accept auction mechanics that are devoid of financial audit mechanisms to validate they are functioning as claimed and not being manipulated by the company selling the media?”
And much like Google’s past auction manipulations that landed it in antitrust trouble with the federal government, industry insiders expect this to become another long, drawn-out episode with a lot of uncomfortable revelations about how one of the ad industry’s biggest players has conducted its business for years. But, given the way Google’s ad tech antitrust trial was resolved this week, advertisers aren’t exactly expecting the government to pursue real change.
Amazon, for its part, has vowed to fight the allegations in court.
Second guessing second price
So, what exactly is the FTC accusing Amazon of doing, and how did it allegedly affect how much advertisers spent on its ecommerce ads?
Like most ad platforms, Amazon runs a second price auction for its Sponsored Products ad placements. Under the typical rules of a second price auction, the highest bidder pays just one cent more than the second-highest bidder, rather than the full winning bid price. For example, if the winning bidder bid $20, and the second-highest bidder bid $10, the winner would pay $10.01.
That’s in contrast to a first price auction where the winning bidder would be on the hook for its full bid price, no matter what other bidders were willing to pay.
But Amazon introduced a feature it calls a “soft reserve price” in 2018. The FTC says Amazon referred to this feature as an “invented auction participant” in internal company communications. This “invented auction participant” would submit a bid that was closer to the winning bidder’s price than the second-highest bid, resulting in the winning bidder paying nearly the full price of its bid.
Because of the influence of the “soft reserve price,” the FTC alleges that, by 2024, 80% of winning bidders on Amazon’s platform were paying nearly their full bid price for ad impressions.
In other words, the FTC alleges Amazon claimed to be running a second price auction, but, in practice, its auctions functioned similarly to a first price auction.
Amazon denies that it runs anything other than a second price auction or that it inserts artificial bids into its auctions. And the company’s statement says it “clearly explain[ed] our focus on relevancy and that advertisers could be charged up to their bid.”
Meanwhile, internal Amazon communications quoted in the FTC complaint suggest the company was aware that it was putting a finger on the scale in its auctions, rather than the auctions being influenced solely by advertiser demand.
The complaint quotes a message from “Amazon’s Senior Vice President in charge of Amazon Ads” – apparently, Paul Kotas, who has worked at Amazon since 1999 – as saying the final price paid by advertisers “isn’t set by an actual bidder” but by a “proxy 2nd price that we calculate.”
This alleged setup enabled Amazon to earn ad revenue “beyond what [can] be achieved through advertiser competition,” according to another quote attributed by the FTC to an Amazon employee.
Regarding these quotes, Amazon’s statement claims the FTC reviewed “1.5 million pages [of documents] spanning six years” and that “the FTC leans on a handful of simplified communications to allege a companywide effort to deceive. That is patently false.”
A reaction of resignation
Overall, the reaction to the FTC lawsuit among the buy side appears to be one of resignation.
“I wish I could say I was surprised by this,” said David Nyurenberg, SVP of digital at InterMedia Advertising. “You have one of the biggest companies in the world, with enormous power across the ecosystem, operating in an industry that has historically done a pretty terrible job of policing itself. When the incentive is to maximize shareholder value and there’s very little accountability, is anyone really shocked when the boundaries get pushed?”
The news has also caused some ad industry experts to question their recent praise for Amazon’s ad platform as a model for its competitors to follow.
For example, Sarah Caputo, founder of buy-side consultancy Fraction Method, favorably compared Amazon to one of its major competitors, The Trade Desk, in a recent column. She has also worked with Amazon in an advisory capacity (although this relationship ended in March, she told AdExchanger). But, as she posted on LinkedIn, the FTC’s Amazon lawsuit feels like an “Et tu, Brute’ moment” – invoking Julius Caesar being betrayed by his most trusted confidant.
“Amazon told advertisers for years they’d pay a penny more than the next-highest bidder, and the FTC says that stopped being true,” Caputo told AdExchanger. “That’s not a technicality. An entire generation of bidding strategy was built on that one assumption, and most advertisers never had a way to check it themselves.”
To be clear, the behavior the FTC alleges does not apply to ads sold through Amazon DSP, but solely to Sponsored Product ads sold through the Amazon Ad Console.
But, although the complaint focuses on just one part of Amazon’s ad business, Amazon’s alleged auction manipulation reveals a deeper problem about the programmatic industry, Caputo said. Auctions don’t always run exactly the way platforms promise, and advertisers don’t know and can’t confirm the rules of the auctions they’re bidding in.
“First price, second price, modified second price, dynamic, floor-based, optimization-based — every platform has its own version now, and increasingly its own ways to avoid explaining what it actually means,” she said. “We’re at the point where even trained media buyers can’t tell you, off the top of their head, what auction type they’re bidding into on half the platforms they use every day.”
According to Caputo, “That’s not a knowledge gap advertisers can train their way out of. It’s what happens when an industry lets ‘auction’ become a marketing word instead of a defined term.”
The deafening silence
While a few industry voices like Caputo have been outspoken in their outrage, the ad industry seems to be less willing to disparage Amazon than previous offenders, Nyurenberg said.
“What actually disappoints me is the silence,” he said. “The Trade Desk has spent the last year getting absolutely beaten up by this industry. Some of that criticism was deserved, some of it was way over the top. But agencies, holding companies and industry voices had plenty to say about it. Now you have the FTC making extremely serious allegations about Amazon’s auction practices, and suddenly it feels like everyone lost their voice.”
He added, “You can’t scream about transparency when it’s convenient and then go quiet when it’s one of the biggest companies in the world.”
Another media buyer who spoke to AdExchanger on the condition of anonymity said they believe the industry’s relative silence has to do with the very fact Caputo pointed out – that advertisers don’t have the transparency into Amazon’s platform they need to check the FTC’s work – and they’re wary of calling out such a major player without concrete proof in hand.
“I think the silence comes down to an inability to audit logs,” they said. “First of all, it’s search, not open web programmatic, so are auction logs even available? Second of all, you’d need to review your win logs as well as the losing bids for that auction. That’s basically impossible to get, and the only ones that would have that are Amazon and now the FTC
The media buyer added that, in light of the federal government’s recent actions against Amazon, Google, Meta and others, the ad industry is “crying out for auction standards and regulation.”
But the former media buyer who spoke to AdExchanger said they believe advertisers have more of a role to play in holding platforms accountable, because they control the purse strings.
“We wouldn’t accept this behavior on Wall Street from a trade clearing process,” they said. “We shouldn’t accept it on Madison Ave, either.”
