The Auction Amazon Said It Ran
For years, Amazon told prospective advertisers it ran a 'second price' auction for Sponsored Products, Sponsored Brands and Display Ads: whoever won a keyword would pay only one cent more than the next-highest bidder, the accepted industry-standard generalized second-price (GSP) model. That promise mattered because it shapes how advertisers bid. In a second-price auction, bidders can safely bid close to their true value, because they know they will only ever pay the minimum needed to win. In a first-price auction, where the winner pays their own bid, bidders learn to shade their bids down over repeated rounds to avoid overpaying.
What the FTC Says Actually Happened
According to the FTC and 22 state attorneys general, that promise stopped being true in 2019, when Amazon allegedly began quietly adding what an internal document calls a 'soft reserve price' to the auction, without telling advertisers. The complaint alleges Amazon charged Sponsored Products advertisers their own winning bid close to 80 percent of the time, converting a nominally second-price auction into an effective first-price one. One internal document quoted in the complaint describes the mechanism as an 'invented auction participant.' A senior Amazon Ads executive is quoted as saying the price advertisers pay 'isn't set by an actual bidder,' but by a 'proxy 2nd price that we calculate.' The complaint alleges the surcharge was ramped up carefully around high-volume events like Prime Day and Black Friday, timed to stay below the threshold where advertisers would notice and cut their bids.
| What Amazon told advertisers | What the FTC complaint alleges |
|---|---|
| A second-price auction: pay one cent more than the next bidder | An internal 'soft reserve price' added in 2019, undisclosed |
| Standard generalized second-price (GSP) mechanics | Advertisers charged their own winning bid close to 80 percent of the time |
| Prices set by advertiser competition | An internal document describes an 'invented auction participant' |
Amazon's Defense
Amazon calls the lawsuit 'misguided' and says it 'fundamentally misunderstands how advertisers operate,' arguing that advertisers adjust bids based on real-world campaign performance rather than the technical description of the auction mechanics. The company points to two figures in its defense: average winning bids for Sponsored Products fell roughly 50 percent from 2019 to 2025, and it estimates advertisers saved more than 8 billion dollars over 2021 to 2025 because Amazon prioritizes ad relevance over raw bid price when ranking placements. Amazon has not disputed the existence of the soft reserve price mechanism itself, only the FTC's characterization of its effect and intent.
The Accountability Gap for European Advertisers
The lawsuit is a US action, filed by the FTC and 22 state attorneys general under US consumer-protection law; no EU member state or UK regulator has brought an equivalent claim. But the auction infrastructure the complaint describes is not a US-only feature bolted onto Amazon's American storefront. Sponsored Products, Sponsored Brands and Display Ads run on the same underlying Amazon Ads platform across amazon.de, amazon.co.uk, amazon.fr and every other European marketplace, sold to European brands and sellers on the identical 'second-price' promise the complaint says was not honored. Whether the same soft reserve price mechanism operates in Amazon's European auctions is not addressed anywhere in the complaint or in Amazon's response, and neither the European Commission nor national competition authorities have said they are looking at it. For any owner running an Amazon Ads budget from Europe, that silence, not the US dollar figure, is the number worth watching: a live US finding about the platform's ad-auction integrity, with no European regulator on record checking whether it applies at home.
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