The FTC and 22 US states are suing Amazon for a manipulated advertising auction system that allegedly stole 20 billion dollars from 1.2 million vendors.

Twenty billion dollars. This is the figure that the Federal Trade Commission (FTC) and the attorneys general of 22 American states believe was illegally taken from Amazon advertisers. The accusation, formalized in a lawsuit on August 31, 2026, speaks of a hidden surcharge scheme that allegedly operated systematically for over seven years, altering the rules of the game in auctions for advertising placements on the platform.

The case is not about simple billing errors, but a structural manipulation of Amazon's internal advertising market, which today is the third largest advertising marketplace in the world after Google and Meta, with advertising revenues exceeding 68 billion dollars. According to the FTC, the company deliberately modified the way it determined prices without adequately informing those paying for those services.

The invented participant mechanism and the soft reserve price

To understand the gravity of the accusation, it is necessary to analyze how advertising auctions work. Traditionally, Amazon described its system as a second-price auction. In this model, the advertiser who offers the highest amount wins the auction, but does not pay the maximum amount offered; instead, they pay an amount slightly higher than that offered by the second-place bidder.

This structure is designed to encourage advertisers to make honest bids based on the real value they attribute to the click, knowing that the final cost will be determined by real competition and not by their own maximum limit.

However, the FTC claims that starting in 2019, Amazon introduced a hidden variable: the 'soft reserve price'. This tool establishes a minimum value for every single advertising placement. If the second-place bid is lower than this reserve price, Amazon still applies the 'soft reserve price' as the basis for calculating the final cost.

The most critical aspect emerges from internal documents cited in the complaint: Amazon allegedly referred to this mechanism as an 'invented auction participant', using a 'proxy 2nd price' to determine how much the winning advertiser should actually pay. In essence, the company allegedly created an artificial competitor to raise the selling price, even when no real competitive pressure existed among vendors.

Amazon's defense on auction efficiency

The company has not denied the existence of system modifications, but radically disputes the legal interpretation and the economic effect. In a post published on its official blog, Amazon defined the legal action as a 'misguided lawsuit'.

The defense's thesis is based on the idea that the changes made to the auctions were not intended to extort money, but to improve advertising performance. According to Amazon, price optimization led to greater overall efficiency, allowing advertisers to achieve better results and, ultimately, to save money in the long run thanks to better space allocation.

Strategic analysis: The divergence between the two positions is sharp. While the FTC looks at the transparency of the process (the fact that the advertiser believed they were competing against other humans and not against a reserve algorithm), Amazon shifts the focus to the result (the effectiveness of the ad). For an entrepreneur, this highlights the risk of operating in 'walled garden' ecosystems where pricing rules are decided unilaterally by the platform owner.

1.2 million advertisers hit by the system

The extent of the damage is not limited to a few large brands, but extends to a critical mass of economic operators. The lawsuit specifies that the system overwhelmed 1.2 million advertising customers.

• Small and Medium Enterprises (SMEs): Over 500,000 small and medium-sized companies were affected, often lacking the technical resources to monitor anomalies in cost-per-click (CPC).
• Global Brands: Large brands investing millions in visibility campaigns.
• Third-Party Vendors: Sellers using Sponsored Product, Sponsored Brands, and Display Ads formats to compete in keyword searches.

These operators bid aggressively thinking their maximum limit served as a ceiling, while in reality, Amazon's 'invented participant' was constantly raising the price floor.

The final economic impact on consumers

If a company pays more to acquire a customer, that cost does not disappear, but is allocated in the product's income statement. This is the central point raised by Andrew Ferguson, chairman of the FTC, and Jeff Jackson, attorney general of North Carolina.

The accusation is that the billions of dollars in surcharges were passed down the supply chain. Advertisers, to maintain their profit margins in the face of inflated advertising costs, raised the selling prices of products. The result is that the final consumer paid more for essential goods, including groceries and other basic necessities sold on Amazon.

'Amazon has millions of advertising customers who were misled into paying significantly higher prices. These higher costs were largely passed on to American consumers'

This reading transforms the case from a B2B dispute (Amazon vs Vendor) into a consumer protection issue, justifying the massive intervention of 22 American states. The Guardian emphasizes how this dynamic fueled the explosive growth of Amazon's advertising division, transforming it into a profit machine almost autonomous from logistics.

Opacity risk and DMA protection for European vendors

Although the lawsuit is American, the implications for Italian and European companies are profound. Many Italian vendors operate on Amazon US or use the same global advertising interfaces. The risk is that opaque pricing models, based on undeclared reserve algorithms, are standardized globally.

In Europe, the Digital Markets Act (DMA) imposes much stricter transparency obligations on 'gatekeepers' than in the USA. The DMA prohibits self-preferencing and requires that data and ranking processes be clear. If it emerged that Amazon applied similar 'invented participant' systems also in the EU market, the company could face sanctions far exceeding the 20 billion contested by the FTC, as the DMA provides for fines based on a percentage of global turnover.

Geopolitical and regulatory analysis: This case accelerates the need for European companies to diversify customer acquisition channels. Relying on a single advertising channel managed by a gatekeeper means accepting an operational risk where the cost of traffic can be manipulated without notice. The verifiable indicator for vendors will be the eventual publication of mandatory transparency reports on advertising auctions requested by the European Commission within the next 12 months.

To delve into the legal details of the complaint, you can consult the official FTC press release or the technical analysis by Search Engine Journal.

In summary, for the Italian entrepreneur, this dossier confirms that the efficiency of a platform must not be confused with transparency. Amazon's ability to generate 68 billion dollars in ad revenue does not justify the use of mechanisms that alter free competition among sellers, especially when such cost falls on the final consumer, eroding trust in the digital market.

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Sources: Searchenginejournal, Ftc, Theguardian ·