US Regulators Sue Amazon Over Hidden Ad Charges

At the centre of the case is how Amazon sells advertising space. When a shopper types a keyword, brands bid in an auction for the most prominent slots. Amazon used what is known as a "second-price" auction, in which the winner expects to pay barely more than the next-highest bid. The plaintiffs say Amazon quietly entered so-called "soft reserve" bids of its own, lifting the floor without telling anyone. The BBC reports that Sponsored Products advertisers ended up paying their own full bid close to 80% of the time. The Guardian reports one manager allegedly described the pricing strategy as "hoping that advertisers don't notice and decrease bids or ad spend". Amazon, whose advertising arm earned about $68 billion last year and ranks third behind Google and Meta, calls the lawsuit "misguided" and says the agency "fundamentally misunderstands how advertisers operate", noting that average winning bids on Sponsored Products search ads fell by half between 2019 and 2025.

Andrew Ferguson, the FTC chair, argued that the extra costs "were largely passed on to American consumers" through higher prices for groceries and other essentials. Amazon rejects that, insisting the case is not really about shoppers at all. Rebecca Haw Allensworth, an antitrust professor at Vanderbilt University, told the New York Post that consumer harm is not required for regulators to win. The plaintiffs are asking the court to halt the practice, impose civil penalties and refund advertisers. Amazon's shares closed 2.5% lower on Monday, according to the BBC. It is the third FTC action against the company; last year Amazon paid $2.5 billion to settle claims that it trapped customers in Prime subscriptions.