The US Federal Trade Commission (FTC) is preparing to file a lawsuit against Amazon, accusing the corporation of systematically inflating minimum bids for advertisers on its platform. The case, which will be brought to court as early as this coming Monday, is supported by more than 20 state attorneys general. The issue concerns a practice that, according to the regulator's estimates, brought Amazon tens of billions of dollars over the past seven years.
The essence of the FTC's claims is that Amazon secretly manipulated auctions for advertising slots without sellers' knowledge. Until 2018, the auction winner paid their own bid, which kept prices low. However, the company then introduced a so-called "soft reserve" — its own bid that was slightly higher than the second-highest one. As a result, the winner was forced to overpay without suspecting it. Amazon saw all competitors' bids but did not disclose the new mechanics to sellers.
According to the FTC, the minimum bid is currently inflated in 70–80% of all auctions, and during peak holiday periods, the cost per click can rise by 50%. Sellers attributed the price increases to high competition, although the real cause lay in the platform's hidden actions. Notably, Amazon's April recommendations for advertisers already included a mention of a "reserve price," which effectively confirms the existence of this scheme.
Market reaction and business risks
Investors did not wait for the official filing of the lawsuit. On Monday afternoon, Amazon (AMZN) shares plunged more than 3% — from $266.43 to $257.87. The company's market capitalization shrank by approximately $86 billion, which is 86 times the $1 billion fine Amazon paid last year in the Prime subscription case.
However, the main threat to the company is not financial sanctions, but a possible change in auction rules. Advertising brought Amazon $69.6 billion in 2025, accounting for about a tenth of total revenue of $716.9 billion. This segment is critically important for covering rising artificial intelligence costs. If the court forces Amazon to revise its bidding mechanics, a key source of profit will come under threat.
Google's experience shows that such proceedings can drag on for years. In 2025, a court ruled Google's advertising business illegal, but the details of the penalty have yet to be determined. For Amazon, what matters is not so much avoiding a fine as maintaining control over its advertising ecosystem.
My view: This lawsuit is a signal for the entire digital advertising industry. If the FTC achieves auction transparency, it could reshape the marketplace economy, where hidden algorithms have long been the norm. Amazon will likely contest the allegations, but even the start of proceedings creates uncertainty that weighs on stock prices. For investors, this is a reminder of regulatory risks that are often underestimated in valuations of tech giants.