The US Federal Trade Commission (FTC) is preparing a major lawsuit against Amazon, accusing the company of systematically deceiving advertisers. The issue concerns a mechanism that brought the retailer tens of billions of dollars over seven years — and now this "golden conveyor" may come to a halt.
The essence of the regulator's claims is that Amazon secretly manipulated advertising placement auctions. Until 2018, the auction winner paid their own bid, which was beneficial to advertisers. However, the company then introduced a so-called "soft reserve": Amazon's own bid, slightly higher than the second-largest one, forced the winner to overpay. At the same time, sellers were not informed of the change, and the corporation's management carefully concealed the details of this scheme.
Scale of Manipulation
In my estimation, this mechanism was particularly actively used during peak sales periods — during holiday seasons, when competition among sellers is at its maximum. The FTC claims that the minimum bid was artificially inflated in 70–80% of all auctions, leading to an increase in cost per click of up to 50% during holidays. In April of this year, Amazon even officially codified the concept of a "reserve price" in its recommendations for sellers, which became an indirect admission of the existence of the controversial practice.
The market reaction was swift: even before the official filing of the lawsuit, Amazon shares (AMZN) plunged more than 3%, and the company's market capitalization shrank by approximately $86 billion in a single day. This is 86 times the $1 billion fine Amazon paid last year in the Prime subscription case.
What's Next?
The main risk for Amazon is not the size of a potential fine, but a possible change in the rules for conducting auctions. The advertising business brought the company $69.6 billion in 2025, accounting for about 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 orders Amazon to abandon the "soft reserve" and disclose the auction mechanics, this will undermine a key source of profit. The experience of Google, whose advertising business was ruled illegal in 2025, but the details of the penalty have still not been settled, shows that such proceedings can drag on for years. However, investors should closely watch not the amount of the fine, but the decision on the auction mechanics themselves — it is this that will determine the long-term trajectory of Amazon's stock.
My professional opinion: this lawsuit is a signal for the entire industry. Regulators are increasingly scrutinizing algorithmic manipulations in digital advertising, and companies that build their business on opaque auctions will have to reconsider their strategies. Amazon will undoubtedly contest the allegations, but the reputational damage has already been done.