FTC Targets Amazon's Ad Pricing Practices
The Federal Trade Commission (FTC) and over 20 state attorneys general are planning to file a lawsuit against Amazon in Seattle federal court. The FTC accuses Amazon of manipulating ad pricing, which could lead to substantial civil penalties and further impact its advertising revenue and market reputation.
Amazon earned $68.6 billion from ads in 2025, with $19.8 billion in Q2 2026, a 26% increase year-over-year. This lawsuit poses a threat to its future ad revenue growth, particularly in the competitive digital advertising landscape.
Since 2018, Amazon has implemented a 'soft reserve' bid in its ad auctions, resulting in higher costs for merchants. Officials stated that this strategy was used in 70% to 80% of auctions, potentially increasing pay-per-click costs by 50% on major shopping days, affecting merchants' ad budgets and sales strategies.
Amazon's stock fell over 3% following the lawsuit news, indicating investor concerns about the legal risks facing the company. Despite a 12% year-to-date gain, market sentiment remains bearish, reflecting worries over the potential impact on its advertising business.