The U.S. Federal Trade Commission (FTC) plans to file a lawsuit against Amazon this week, accusing the corporation of systematically deceiving advertisers. The core of the claims is a hidden inflation of minimum bids in advertising auctions, which over seven years brought the e-commerce giant tens of billions of dollars in excess profits. This concerns unprecedented pressure on a key business segment of the company, which is becoming increasingly critical to its financial model.
Attorneys general from more than 20 states will join the lawsuit. The market has already reacted swiftly: in the afternoon, Amazon (AMZN) shares plunged more than 3%, and market capitalization shrank by approximately $86 billion. Investors are clearly not waiting for formal proceedings, locking in losses right now.
How the price manipulation scheme worked
The mechanics, according to the regulator, are as follows. Previously, advertising placement auctions operated on a "second-price" principle: the winner paid only slightly more than the competitor's bid, keeping costs low. However, in 2018, Amazon introduced its own "shadow" bid, set just above the second-highest one. This forced the winner to pay more and allowed the company itself to earn additional revenue, internally referred to as a "soft reserve."
The key point is complete opacity. Amazon saw all participant bids but did not disclose to sellers the fact that its own bid existed. Management carefully tracked the additional profit, keeping details in the strictest secrecy. The mechanism was first applied during peak sales seasons, when competition was already high. According to FTC estimates, the minimum bid is now inflated in 70–80% of all auctions, and during holiday periods, the cost per click rises by 50%. Notably, in April updates to seller recommendations, Amazon already openly mentions a "reserve price."
Risks for shares and business
The drop in quotes on Monday is just the tip of the iceberg. For comparison: last September, Amazon paid a $1 billion civil penalty in the Prime subscription case, but then the market lost an amount 86 times greater than that fine in a single day. However, the main threat now is not financial sanctions, but a possible change in the rules of the game. The advertising business brought Amazon $69.6 billion in 2025 — roughly a tenth of total revenue of $716.9 billion. It is this segment that helps the company finance its enormous spending on artificial intelligence.
If the court changes the auction mechanics, the main source of profit will come under direct attack. Google's experience shows that such proceedings can drag on for years — in 2025, a court ruled the search giant's advertising business illegal, but the details of the penalty have still not been determined.
My analysis: Investors should focus not on the size of the potential fine, but on what decision the court will make on the merits of the auction model. If the FTC secures a ban on "soft reserves," it will hit Amazon's margins far harder than any one-time penalty. For now, AMZN shares, trading around $257, may remain volatile — uncertainty over regulatory pressure will not go away in the coming months.