FTC Sues Amazon Over "Secret" Ad Auction Surcharge

The Federal Trade Commission (FTC) and 22 state attorneys general are suing Amazon over an alleged late-2018 change to Sponsored Products ads that let Amazon secretly inflate prices in its second-price auctions, extracting an estimated $20 billion in revenue since 2019. The FTC alleges an "invented auction participant", a soft reserve bid that pushed winners toward paying nearly their full bid, so that by 2024 around 80% of winning bidders paid roughly their full price. Amazon denies it and says it "clearly explained our focus on relevancy". The buy side is resigned rather than outraged. Sarah Caputo, founder of buy-side consultancy Fraction Method, said: "Amazon told advertisers for years they'd pay a penny more than the next-highest bidder, and the FTC says that stopped being true. That's not a technicality. An entire generation of bidding strategy was built on that one assumption." David Nyurenberg, SVP digital at InterMedia Advertising, called out the industry's silence compared with the criticism aimed at The Trade Desk.

The crux

Amazon allegedly ran a second-price auction that functioned like a first-price auction without telling advertisers, and the reaction across the industry shows how little financial audit capability exists in programmatic auctions at all.

Sell-side read

Every auction you sell into and buy through deserves the same audit scrutiny; expect this suit to accelerate advertiser demand for transparency and third-party verification, which premium publishers can lean into as a differentiation.

Watch

Whether the FTC case forces disclosure of auction mechanics across Amazon's ad console and whether advertisers start demanding contractual audit rights, within the next two quarters.

Sell-side read

Every auction you sell into and buy through deserves the same audit scrutiny; expect this suit to accelerate advertiser demand for transparency and third-party verification, which premium publishers can lean into as a differentiation.

Watch

Whether the FTC case forces disclosure of auction mechanics across Amazon's ad console and whether advertisers start demanding contractual audit rights, within the next two quarters.

Watch

Whether the FTC case forces disclosure of auction mechanics across Amazon's ad console and whether advertisers start demanding contractual audit rights, within the next two quarters.