The US Federal Trade Commission (FTC) intends to file a lawsuit against Amazon as early as this coming Monday. At the center of the claims is a hidden scheme to inflate minimum bids for advertisers, which, according to the regulator's estimates, brought the company tens of billions of dollars over the past seven years. This concerns a systemic violation that casts a shadow over the transparency of the tech giant's advertising business.
How the bid manipulation scheme worked
The essence of the allegations is that Amazon secretly changed the mechanics of its advertising auctions. Previously, the auction winner did not overpay — bids remained at the lowest possible level. However, starting in 2018, the company began introducing its own "reserve" bid, which was slightly higher than the second-highest bid. This forced the winner to pay more, and internally the company referred to this practice as a "soft reserve."
Amazon saw all competitors' bids but did not disclose this information to sellers. Management carefully tracked the additional profit and kept the details under wraps. The method was first applied during peak sales periods, when sellers attributed rising prices to high competition. Today, according to the FTC, the minimum bid is inflated in 70–80% of auctions, and during holiday seasons the cost per click increased by 50%. Notably, Amazon's April recommendations for sellers already mention a "reserve price."
Market reaction and outlook
Investors did not wait for the official complaint. In the afternoon, Amazon (AMZN) shares plunged more than 3%, and market capitalization shrank by approximately $86 billion. This decline far exceeds past fines — for example, in September of last year, the company paid a $1 billion civil penalty for the Prime subscription enrollment process.
However, the main risk for Amazon is not the size of a potential fine, but a possible change in the rules governing auctions. Advertising brought the company $69.6 billion in 2025, accounting for roughly a tenth of total revenue of $716.9 billion. This segment is particularly profitable and helps cover enormous AI infrastructure costs. If the court changes the auction mechanics, the primary source of profit will come under threat.
The Google example shows that such cases can drag on for years. In 2025, a judge ruled the company's advertising business illegal, but the details of the penalty have still not been resolved. For Amazon, the key signal will not be the size of the fine, but the decision the court reaches on the merits — whether it will change the advertising auction model itself.
My analysis: This is not just another regulatory dispute. If the FTC succeeds in banning "soft reserves," Amazon will lose not only part of its revenue but also its competitive advantage in the advertising ecosystem. For investors, this is a signal to reassess the sustainability of the company's business model amid intensifying antitrust pressure.