FTC sues Amazon over ad auctions: audit your channel spend

The FTC and 22 state attorneys general sued Amazon on August 31, alleging it quietly rewired its search advertising auctions in 2019 and charged more than a million sellers inflated prices for seven years without telling them. If you buy Sponsored Products placements, the Amazon ad auction you were bidding into may not have been the one described in the docs.

What actually happened

The FTC's complaint says Amazon told advertisers it ran a second-price auction: win, and you pay one cent above the next-highest bid. Regulators allege that starting in 2019 Amazon added an undisclosed markup it called internally a "soft reserve price", plus what one internal document described as an invented auction participant — a bidder that did not exist, inserted to drag the clearing price up.

The practical effect, per the complaint, is that winners paid their own full bid roughly 80% of the time. CBS News reports the suit covers over 1 million brands and sellers, including more than 500,000 small and mid-sized businesses, and estimates the overcharge in the tens of billions of dollars. FTC Chairman Andrew Ferguson said advertisers "were misled into paying significantly higher prices." The states want an injunction, penalties, and restitution.

Amazon calls the suit "misguided" and says the complaint "fundamentally misunderstands how advertisers operate," pointing to average winning bids dropping 50% between 2019 and 2025 and more than $8 billion in advertiser savings from 2021 to 2025. TechCrunch notes Amazon booked over $68 billion in ad revenue last year. Nothing here is proven. It is an allegation, and it will take years.

Why an unauditable ad auction matters for your business

Forget the verdict. The structural fact is the lesson: you cannot audit an auction you do not run. Your bid goes into a black box, a number comes back, and your only instrument is the CPC the platform reports to you. There is no independent log. When the mechanism changes, you find out from a lawsuit seven years later.

That is the real cost of a rented channel, and it is not unique to Amazon. It applies to every marketplace, ad network, and answer engine that sits between you and a buyer. You are not buying customers. You are buying access, priced by the landlord, on terms the landlord can revise.

So treat marketplace ad spend as a variable input with unknowable unit economics, not a controllable line item. Model your business at zero paid marketplace traffic and see what survives. Build the channels where you hold the log: your own storefront, your email list, your SMS file, your repeat-purchase flow. Then measure blended CAC across all of it, so a silent 20% CPC drift on one platform shows up in your numbers instead of hiding in a per-channel dashboard the platform also controls.

Sources: FTC press release, CBS News, TechCrunch.