The U.S. Federal Trade Commission (FTC) plans to file an antitrust lawsuit against Amazon this coming Monday, accusing the company of systematically deceiving advertisers. The case centers on the 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. Attorneys general from more than 20 states will join the lawsuit, making this one of the most sweeping regulatory challenges Amazon has faced in recent years.
How the "soft reserve" scheme worked
The essence of the allegations is as follows: until 2018, Amazon ran advertising auctions using the classic Vickrey model, where the winner paid the second-highest bid. However, the company then introduced a so-called "soft reserve"—its own hidden bid that was slightly higher than the second-highest bid. This forced the winner to pay more, while sellers were unaware that such a practice existed.
According to the regulator, Amazon saw all competitors' bids but carefully concealed this mechanism even from its own management, tracking the additional profit in secret. The method was actively used during peak sales periods, when sellers attributed rising prices to intense competition. Currently, the minimum bid is inflated in 70–80% of all auctions, and during holiday periods, the cost per click, according to FTC estimates, rose by 50%. Notably, in April updates to its seller recommendations, Amazon already officially mentions a "reserve price."
Market reaction: investors vote with their feet
The market did not wait for the official filing of the lawsuit. On Monday afternoon, Amazon (AMZN) shares plunged more than 3%, and the company's market capitalization shrank by approximately $86 billion. The stock, which traded near its all-time high in August, fell from $266.43 to $257.87 during the session. This decline is 86 times greater than the $1 billion civil penalty Amazon paid in September last year in the Prime subscription case.
However, the main risk for the company is not the size of a potential fine, but a possible change in the rules of the game. Advertising brought Amazon $69.6 billion in 2025, accounting for roughly a tenth of total revenue of $716.9 billion. This segment is critically important for covering the enormous costs of developing artificial intelligence. If the court changes the auction mechanics, a key source of profit will come under threat.
The experience of Google 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. In my view, in Amazon's case, investors should pay closer attention not to the size of the fine, but to what specific measures the court orders regarding the auction mechanism—this will determine the long-term trajectory of the stock.