The U.S. Federal Trade Commission, joined by 22 states, sued Amazon over how it ran Sponsored Products, Sponsored Brands, and Display auctions for more than seven years. TechCrunch reports the complaint says Amazon told more than 500,000 small and mid-sized advertisers it used a second-price auction — winner pays one cent over the next bid — then quietly added a “soft reserve price” and what internal docs allegedly called an “invented auction participant,” effectively a shill bid that pushed prices up.
The FTC claims winners paid their full bid close to 80% of the time, turning a marketed second-price system into something closer to first-price, affecting more than 1 million brands and sellers and potentially tens of billions in extra ad revenue. Amazon called the suit “misguided.” Amazon’s ad business cleared more than $68 billion last year — the stakes are platform-scale.