The FTC and 22 states just sued Amazon, claiming it secretly overcharged adverti
By Liranhirschkorn · September 2, 2026 · Curated by George's Blog
The FTC and 22 states just sued Amazon, claiming it secretly overcharged advertisers by tens of billions of dollars.
The complaint says Amazon told advertisers Sponsored Products ran a second-price auction: win, and pay one cent more than the next highest bid. Starting in 2019, Amazon allegedly added hidden "soft reserve prices" that pushed winners toward paying their full bid.
By 2024, advertisers paid their full bid about 80% of the time. Internal documents describe an "invented auction participant" and call the system a "clever non-transparent way to charge first price."
If those quotes hold up, Amazon misled advertisers for years. That's a problem for Amazon's lawyers, but it won't be a problem for Amazon's ad business.
Advertisers don't set bids based on how the auction is described. They set bids based on what a click costs and what it converts at. You raise bids when ACOS is under target and cut them when it's over. That math worked the same whether the auction was second-price or first-price, which is why a million advertisers ran through this system for seven years without noticing.
There's also nowhere else to go. If your customers buy on Amazon, Sponsored Products is the shelf. Nobody pauses their campaigns in protest and hands their organic rank to a competitor.
Google moved its display auctions from second-price to first-price in 2019, announced it openly, and advertisers kept spending. Google also paid billions in ad-tech fines over the past decade while its ad revenue grew every year. Amazon's ad business did over $68 billion last year. This case will take years, and the likely outcome is a fine and clearer disclosure. Against $68 billion a year, that's a cost of doing business.
The stock still fell on the headline. Buy the dip.
*Not financial advice.
What changes for brands: probably more transparency about how the auction prices your clicks.
What doesn't change: your CPCs next month, your bid strategy, or the fact that the only numbers that matter are cost per click and conversion rate.