FTC Prepares Lawsuit Against Amazon Over Secret Advertising Price Manipulation

Amazon's stock took a hit on Monday after reports emerged that the Federal Trade Commission (FTC) is preparing to sue the e-commerce giant over allegations it secretly manipulated advertising prices on its retail platform for years.

The lawsuit, expected to be filed in a Seattle federal court, accuses Amazon of deceiving advertisers by quietly raising the minimum amounts businesses had to pay to place promotional ads. More than 20 state attorneys general from both parties are set to join the case, including those from New York, California, and Florida.

At the center of the allegations is a bidding mechanism Amazon reportedly began using in 2018. The company allegedly inserted its own bid into ad auctions, referred to internally as a 'soft reserve.' This reserve was set higher than what the runner-up advertiser had offered, effectively pushing up the final price merchants paid for each ad placement.

The practice was initially deployed only on high-traffic shopping days, when advertisers would plausibly attribute steeper ad costs to heightened competition for consumer attention. However, over time, the intervention became routine, with Amazon adjusting auctions to raise the minimum price in 70% to 80% of cases, according to the FTC's claims.

Amazon has publicly acknowledged using 'reserve pricing' on an advertiser help page, stating that it 'may affect the cost of your ad.' The FTC's case centers on whether the company adequately disclosed the scope and mechanics of its intervention.