Amazon is facing a new battle that touches the core of its most discreet and profitable model: advertising. On August 31, the Federal Trade Commission and 22 U.S. states filed a lawsuit against the company, accusing it of secretly inflating the prices of advertising auctions on Amazon.com and in its app. According to the agency, more than one million brands and sellers were affected, including more than 500,000 small and medium-sized businesses. The Associated Press reports that the case was filed in federal court in Washington state, Amazon’s legal home ground. Amazon strongly denies the allegations and calls the complaint misguided.
The case goes far beyond a technical dispute over auctions. It raises a much heavier question: what is advertising transparency worth when the platform controls the store, the data, the placement, the price, the ranking and access to the consumer? For years, retail media has been sold as the future of digital advertising: closer to purchase, more measurable and more effective than classic banners. The FTC’s complaint is a reminder that this promise rests on fragile trust. If the pricing mechanism becomes opaque, efficiency can turn into dependence.
The Core of the Case: The Second-Price Auction
The FTC says Amazon presented its sponsored advertising as a second-price system, where the winner pays only slightly more than the second-highest bidder. That principle matters because it encourages advertisers to bid closer to their true value: they believe they will not pay their full offer, only the minimum necessary to win. According to the complaint, however, Amazon added hidden reserve prices and internal calculations from 2019 onward that increased the amount charged to advertisers.
In its release, the FTC describes a system that allegedly converted part of the auctions into something closer to a first-price logic, where the advertiser pays its own bid. The agency cites internal documents referring to a surcharge embedded in the price, a proxy calculated by Amazon and even an invented auction participant. These elements remain allegations, and they will have to be tested in court. But they already give the case symbolic reach: the trial is not only about cents per click, but about the invisible governance of online commerce.
Why Sellers Are Vulnerable
For independent brands and sellers, Amazon is not only a distribution channel. It is often the place where demand is formed. A product may exist, be well rated, well stocked and correctly priced, yet remain invisible without sponsored advertising. That reality gives Amazon Ads a particular power. Buying advertising on the platform does not always feel like a marketing option; it can become the entry price for being seen inside the world’s largest digital shopping mall.
That is why an opaque change in cost per click can have very concrete effects. It reduces margins, changes budgets, pushes sellers to raise prices or cut other spending. In low-margin categories, a few points can alter the entire economics of a product. The FTC argues that the costs were largely passed on to consumers. Amazon responds that the complaint does not show consumer price increases and that its prices remain competitive. The debate will be legal, but the issue is industrial: who bears the real cost of visibility?
Retail Media Enters the Age of Suspicion
The timing is delicate. Amazon has become one of the three major global players in digital advertising, behind Google and Meta, with an advertising business measured in tens of billions of dollars a year. That success has inspired the entire sector. Walmart, Target, Instacart, Uber, major grocery chains and delivery platforms all want to sell advertising based on their transaction data. Retail media offers advertisers something highly seductive: speaking to the consumer at the exact moment when purchase can happen.
But the larger this market becomes, the more urgent verification becomes. Brands cannot simply believe the platform that sells the audience, sets the price, measures performance and attributes the conversion. They will need audits, standards, understandable reports, external comparisons and safeguards. The case against Amazon could therefore become a foundational moment even before judgment: it forces the industry to look at advertising auctions as market infrastructure, not as a simple software feature.
Amazon Defends Its System
Amazon, for its part, rejects the FTC’s interpretation. In an official post, the company says the case is misguided, that the agency simplifies internal communications and that it proves no harm to consumers. The company emphasizes the complexity of its auctions, the natural variation of prices across formats, placements and demand, and the savings customers would achieve through its pricing and promotional programs. In other words, Amazon wants to move the debate: according to the company, the complaint does not understand how advertisers actually use its tools.
That defense matters. It reminds us that platforms are not automatically malicious black boxes; they operate complex, dynamic systems that can be difficult to explain even to experienced advertisers. But that is precisely what makes the case explosive. When a market becomes too complex to be understood by those who finance it, trust stops being a matter of commercial relationships. It becomes a matter of regulation.
A Battle Over Power, Not Only Price
The real subject is intermediation power. Amazon can tell a brand where to sell, how to appear, how much to pay to rise in results and which data to look at afterward. Few economic actors have so many points of control over the full journey between desire, search, advertising, purchase and delivery. That integration is the company’s strength. It is also what attracts scrutiny from authorities.
For small businesses, the paradox is brutal. Amazon opens a huge market to them, but it also places them inside an environment where the rules can feel asymmetrical. Advertisers see their results, clicks and sales, but they do not always see the fine mechanics that determine the price of access. The FTC’s complaint gives legal form to a long-standing anxiety: in modern e-commerce, competition is not fought only between products. It is fought in the invisible layers that decide which product will be seen.
What the Case Could Change
If the FTC succeeds in imposing its reading, the impact could go beyond Amazon. Regulators may demand more transparency around auctions, reserve prices, algorithmic changes and explanations given to advertisers. Brands may ask for stronger contractual guarantees and reduce their dependence on a single platform. Media agencies could also strengthen their audit role, helping sellers compare what they pay with what they truly receive.
For B-EMPIRE, this trial tells the story of retail media entering adulthood. The market is no longer a shiny novelty promised infinite growth. It is becoming a central infrastructure of the digital economy, and therefore a political object. Amazon built a massive advertising machine on purchase intent. The FTC is now asking who controls the rules of that machine. The answer will say a great deal about the future of online commerce: a world where visibility is bought through readable auctions, or a world where the price of attention remains hidden behind the platform that sells everything.
Sources
- Federal Trade Commission – FTC, States Sue Amazon Over Secret Ad Surcharge Scheme
- Associated Press – FTC and 22 states sue Amazon over inflated advertising prices
- The Verge – FTC lawsuit alleges Amazon overcharged for ads
- TechCrunch – FTC accuses Amazon of secret ad surcharge scheme
- Amazon – Response to the FTC lawsuit regarding Sponsored Ads
- CBS News – FTC and 22 states sue Amazon over alleged ad scheme
