The FTC's soft-reserve allegation lands the verification problem on the advertiser's desk
Regulators say a synthetic bid quietly lifted the clearing price inside Amazon's ad auctions. The awkward part for buyers is that the only party who can confirm their own exposure is the party being sued.
The Board Room · Leadership desk
What happened
- The Federal Trade Commission and 22 states sued Amazon on Monday, alleging the retailer secretly and systematically overcharged advertisers buying ads on Amazon.com.
- The alleged mechanism is a "soft reserve": Amazon inserting its own synthetic bid into second-price auctions to lift the final price advertisers paid, without telling them.
- The complaint puts the total at more than $20 billion extracted from advertisers since the practice began in late 2018, the central figure in the case.
- Amazon called the suit misguided, saying the FTC reviewed roughly 1.5 million pages spanning six years and then leaned on a handful of simplified communications, which the company called patently false.
- The FTC and the states are asking the court to bar the practices, impose civil penalties and order refunds to advertisers.
Why it matters
- What it limits constraint A clearing price partly set by the platform's own bid cannot be reconstructed from that platform's reporting, which is why Ebiquity's practical advice is to get Amazon to attest in writing that a given account was untouched. Diligence now runs through the counterparty.
- Who has to decide decision Buyers have to settle on an acceptable price this quarter while accepting an untransparent platform margin, rather than wait for a court to define what was taken, and that pushes the decision onto internal metrics nobody else supplies.
- Who's exposed exposure The more than 500,000 small and mid-sized businesses among the 1.2 million accounts the FTC counts are the least able to fund independent measurement, which leaves the refund remedy as their realistic route to recovery.
- What doesn't add up contradiction The FTC frames the harm as costs largely passed through to American consumers while Amazon answers that it gives customers the lowest prices every day, and whichever framing the court adopts shapes whether money flows back to advertisers or into penalties.
Next story · Product · Oct 9
Apple gets hiring rights at Huxe, the shut-down AI audio app built by ex-NotebookLM developersConfirmed4 publishers
The two numbers Amazon has put in front of advertisers answer a question the FTC did not ask. Amazon says its ranking formula gives more weight to ad relevancy than to bid amount, and that approximately 92% of selected Sponsored Products ads in 2024 were not the highest bid [11][14]. It estimates that this approach saved advertisers more than $8 billion between 2021 and 2025 [13]. Those are claims about which ad gets picked. A soft reserve, as the FTC describes it, is a claim about what the winner then pays: a second-price auction charges the winner a notch above the next-highest bid, so a synthetic bid inserted into the mix moves the notch [25][26]. Both descriptions can hold at the same time, which is the whole difficulty for a buyer working only from platform-supplied reports.
The scale is worth handling carefully. The FTC's headline figure is more than $20 billion since late 2018, applied through surcharges the suit says ran for seven years across more than a million Amazon brands and sellers [1][3]. Spread evenly, that is roughly $2.9 billion a year, about 4.2% of the more than $68 billion in site ad revenue the agency attributes to Amazon [10]. Across the 1.2 million advertising accounts the FTC counts, the average works out near $16,700 over the whole period [12]. Distribution is unknown, so no individual advertiser should read the average as its own bill. But a margin of that order sits inside the normal variance of paid search, and the complaint alleges Amazon tested how far it could push charges without advertisers flinching, with one manager described as hoping advertisers would not notice and cut bids or spend [29][28].
A skeptic has a reasonable answer to all of this. Luke Stillman of Madison and Wall does not expect Amazon's ad business to take a major hit, because advertisers decide where to spend based on whether the advertising works and what it returns, which he says is truer in commerce media than in any other channel [22]. Amazon makes a related argument, saying marketers adjust bids on performance rather than auction mechanics [6]. That is probably right about revenue, and it is also why the gap persists: return-based buying treats the clearing price as an input it never audits, so a quiet margin produces no trigger. Stillman also notes that if Amazon were forced to change its auction dynamics, prices could fall in the short term to advertisers' benefit [30], which means the upside arrives, if it arrives, from a remedy buyers do not control.
Which leaves the part operators can act on. Ebiquity's Ruben Schreurs is telling clients to remain calm and pragmatic about what are still allegations, and to quantify what they spent on the ad products named in the suit over the period it covers [18][19]. His second suggestion is the cheaper one: obtain a statement from Amazon confirming that none of their spending was exposed, which preserves a claim later [20]. Alan Chapell's point is that independent efficacy checks were already the right investment and now warrant more [21], and Nick Manning's is blunter, that walled gardens and black boxes hold all the cards [16]. The record also shows repeated transparency scandals have not dented platform spending, as CMOs lean harder on the largest platforms for audiences, targeting and measurement [23]. This quarter the choice is whether to fund measurement you own; next quarter that choice determines whether the exposure question is one you can answer yourself or one you have to ask Amazon to answer for you.
What to watch
- Whether Amazon issues the per-advertiser attestations Ebiquity is asking clients to request, or declines in a way that pushes buyers toward filing claims.
- Which remedy the court actually reaches: refunds routed back to advertiser accounts, or civil penalties paid to governments, which are different pots for different parties.
- Amazon's next disclosed advertising revenue figure, the only public read on whether buyers moved money after the complaint landed.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence58
- Adoption30
- Hype gap+18
- Incentives76
- Confidence64
Perspective Coverage
4 publishers- Builder
- Builder 19%
- Operator
- Operator 41%
- Investor
- Investor 40%
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The complaint alleges the scheme likely extracted more than $20 billion from advertisers since it began in late 2018.
- [2]
The FTC and 22 states sued Amazon on Monday, alleging the online retailer "secretly and systematically overcharged" advertisers on Amazon.com.
- [3]
The lawsuit alleges undisclosed surcharges were applied for seven years, increasing the prices that more than 1 million Amazon brands and sellers were required to pay to advertise on the platform.
- [4]
Amazon called the action a "misguided lawsuit" and said that after reviewing approximately 1.5 million pages spanning six years, the FTC leans on a handful of simplified communications to allege a companywide effort to deceive, which Amazon called "patently false".
- [5]
The lawsuit alleges 1.2 million advertising customers were overcharged since 2019, including more than 500,000 small and medium-sized businesses.
- [6]
Amazon said the FTC's claim misunderstands how advertisers operate, arguing that marketers adjust their bids based on performance rather than auction mechanics.
- [7]
Amazon denied the allegations and said the company gives "customers the lowest prices every day across the widest selection of products".
- [8]
The FTC says Amazon generates more than $68bn in ad revenue on its website.
- [9]
Amazon's advertising business has become the third-largest online advertising marketplace after Google and Meta.
- [10]
The FTC's alleged $20 billion, spread evenly over the seven-year surcharge period, is roughly $2.9 billion a year, about 4.2% of the more than $68 billion in site ad revenue the agency attributes to Amazon. The $68 billion figure is a single-year revenue figure while the alleged extraction spans seven years.
- [11]
Amazon said its ranking formula gives more weight to ad relevancy than to bid amount, and that it properly explains its pricing and auctions to advertisers, including on its Amazon Ads help pages.
- [12]
Across the 1.2 million advertising accounts the FTC says were overcharged, more than $20 billion averages roughly $16,700 per account over the whole period.
- [13]
Amazon estimated that advertisers saved more than $8 billion between 2021 and 2025 because it prioritizes "ad relevancy" over selecting ads on bid price alone.
- [14]
Amazon said approximately 92% of selected Sponsored Products ads in 2024 were not the highest bid, "often by a wide margin".
- [15]
The federal agency and states are asking the court to bar Amazon from continuing the allegedly deceptive advertising practices, along with paying civil penalties and refunding advertisers.
- [16]
Nick Manning, founder of media consultancy Encyclomedia, said the suit's allegations are another sign to CMOs that "walled gardens and black boxes hold all the cards".
- [17]
Manning said advertisers have to decide whether the price they pay on Amazon, Google or Meta meets their requirements even if there is an uncontrollable and untransparent margin for the platform in there, using their own metrics and systems.
- [18]
Ruben Schreurs, CEO of marketing consultancy Ebiquity, said he is guiding clients to "remain calm and pragmatic" over what are, at present, just allegations.
- [19]
Ebiquity recommends that CMOs, through their media teams or agencies, investigate how much they spent on the ad products detailed in the suit over the period it references.
- [20]
Schreurs advised CMOs to obtain a statement directly from Amazon unequivocally confirming that none of their spending was exposed to the alleged issues, which can be useful if they want to pursue a claim later.
- [21]
Alan Chapell, a privacy attorney and regulatory analyst, said advertisers should already be investing in alternative ways to check the efficacy of their ad spending on big platforms like Amazon, and that the suit shows they need to double down on that.
- [22]
Luke Stillman of consulting firm Madison and Wall does not think Amazon's ad business will take a major hit from the suit, writing that advertisers decide where to spend based on whether the advertising works and the return they are getting, which is more true in commerce media than in any other channel.
- [23]
Repeated transparency scandals have not dented ad spending, as CMOs grow ever more reliant on the largest platforms that provide vast audiences, targeting and measurement tools.
- [24]
Amazon shares fell nearly 3% at 3 p.m. EDT after the report was published, falling to around the $258 mark.
- [25]
In a second-price auction, an advertiser sets a maximum price it is willing to pay (say $1), but if the next-highest bid is only $0.50, the advertiser pays around $0.51.
- [26]
The FTC alleges Amazon sometimes secretly used a "soft reserve", effectively inserting its own synthetic bid into the mix, to raise the final auction price without advertisers knowing.
- [27]
FTC chair Andrew Ferguson said Amazon has millions of advertising customers who were misled into paying significantly higher prices, and that these higher costs were largely passed on to American consumers.
- [28]
Internal documents show one manager allegedly describing Amazon's pricing strategy as "hoping that advertisers don't notice and decrease bids or ad spend".
- [29]
The suit alleges Amazon tested how much it could increase the amount it charges without advertisers flinching.
- [30]
Stillman added that if Amazon were forced to change its auction dynamics, it could cause ad prices to fall in the short term, benefiting advertisers.
Sources
4 independent publishers whose own reporting we read for this story.
- businessinsider.comAmazon's fight with the FTC contains an uncomfortable lesson for advertisers
1 article · September 2, 2026
- cbsnews.comFTC and 22 states sue Amazon over alleged secret ad surcharge scheme - CBS News
1 article · August 31, 2026
- forbes.comAmazon Facing FTC Lawsuit Over Secretly Raising Advertiser Prices
1 article · August 31, 2026
- theguardian.comUS trade regulator and 22 states accuse Amazon of taking $20bn with secret surcharges | Amazon | The Guardian
1 article · August 31, 2026
Topics and entities
Topics
- Ad Spend Verification and Transparency
- US Regulatory Enforcement Against Big Tech
- Retail and Commerce Media
- Digital Ad Auction Mechanics
Entities
- Second-price auction
- Million Dollar Sellers
- Amazon Ads
- Andrew Ferguson
- Amazon
- Federal Trade Commission
- Meta
- Madison and Wall