The U.S. Federal Trade Commission (FTC) is preparing for a massive legal showdown with Amazon. As early as this coming Monday, the regulator will file a lawsuit accusing the company of systematically deceiving advertisers. The core of the claims is a hidden inflation of minimum bids at auctions, which has brought the e-commerce giant tens of billions of dollars over the past seven years. Attorneys general from more than 20 states will join the lawsuit, underscoring the seriousness of the allegations.
The market has already reacted swiftly: even before the official filing, Amazon (AMZN) shares plunged more than 3% in the afternoon, and the company's market capitalization shrank by approximately $86 billion. This is a signal that investors view the risks not as a formality, but as a real threat to a key business segment.
How the bid inflation scheme worked
The mechanics, according to the allegations, are as follows. Traditionally, Amazon auctions were conducted so that the winner did not overpay: bids remained at the lowest possible level. However, in 2018, the company introduced its own "shadow" bid, which was slightly higher than the second-highest one. This forced the winner to pay more. Inside the corporation, this mechanism was cynically called a "soft reserve."
Amazon, having access to all competitors' bids, withheld this information from sellers. Management carefully tracked the additional profit and kept the details secret. The scheme was first applied during peak sales seasons, when sellers attributed rising prices to high competition. Today, according to FTC estimates, the minimum bid is inflated in 70–80% of auctions, and during holiday periods, the cost per click rises by up to 50%.
Notably, in the seller guidelines updated in April, Amazon already openly mentions a "reserve price," although it was recently still a hidden tool. "Some reserves help allocate ad placements by setting a bid threshold," the company's official instructions state.
Risks for shares and business
On Monday, AMZN shares traded around $257.87, down from $266.43 in the previous session. In August, the stock was near all-time highs, so the current decline is merely a correction. However, the scale of the reaction is impressive: in one day, the market lost an amount 86 times greater than Amazon's $1 billion fine last year for manipulating Prime subscriptions.
The main risk for the company is not the fine, but a potential change in auction rules. Advertising brought Amazon $69.6 billion in 2025—roughly a tenth of total revenue of $716.9 billion. This segment is critically important for covering the enormous costs of AI infrastructure. If the court restricts pricing mechanisms, the main source of profit will come under threat.
The Google experience shows that such cases can drag on for years: in 2025, a court ruled the company's advertising business illegal, but the details of the penalty have yet to be determined. For Amazon, this means prolonged uncertainty that will weigh on stock prices.
My analysis: Investors should watch not the size of the potential fine, but court decisions on auction mechanics. If the FTC achieves transparency, Amazon will lose not only money, but also its competitive advantage in the advertising ecosystem. This could become a turning point for the entire digital advertising market.