The U.S. Federal Trade Commission (FTC) will officially file a lawsuit against Amazon next week, accusing the tech giant of systematically deceiving advertisers. The case involves the hidden inflation of minimum bids in auctions, which generated tens of billions of dollars in excess profits for the company over seven years. This is no longer just a regulatory complaint, but a direct challenge to Amazon's core business model.
How the scheme worked and why it matters for the market
The essence of the FTC's allegations is as follows: since 2018, Amazon has implemented a so-called "soft reserve"—a mechanism in which the platform secretly added its own bid to the auction. Given that Amazon could see all competitors' bids, it could artificially raise the price for the winner without disclosing this. Sellers, in turn, attributed the increase in costs to seasonal competition, especially during peak periods.
In my assessment, the scale of the manipulation is striking: the minimum bid was inflated in 70–80% of all auctions, and during holiday periods, the cost per click rose by 50%. This is not just a technical detail—it is a direct distortion of market mechanisms that has hit hundreds of thousands of small and medium-sized entrepreneurs who depend on Amazon as their primary sales channel.
Market reaction: investors vote with their feet
Already in the second half of Monday, Amazon (AMZN) shares plunged more than 3%, and market capitalization lost about $86 billion. This happened in just a few hours—before the official filing of the lawsuit. Investors vividly remember last year's $1 billion fine for Prime subscription manipulations, but today's reaction shows: the market fears not so much the fine as possible structural changes in the advertising business.
Advertising 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 massive spending on artificial intelligence. If the court forces Amazon to change auction rules, the main source of profit will be at risk, and that is far more serious than any one-time fine.
The Google experience shows that such litigation can drag on for years: in 2025, a court ruled the company's advertising business illegal, but the details of the penalty are still unresolved. I expect Amazon to use all available legal mechanisms to drag out the process, but the long-term risk to its advertising monopoly is already evident. Investors should closely watch not the size of the potential fine, but what changes will be made to the auction mechanics—those will determine the future of this business.