FTC Amazon Sponsored Ads lawsuit: Amazon rejects claims

The FTC's Amazon Sponsored Ads lawsuit alleges Amazon misled advertisers about how its Sponsored Ads pricing and auctions operate.

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Amazon says the case is misguided, according to Amazon News, and argues the FTC shows no consumer price increases and no advertiser harm.

What the FTC alleges and what Amazon argues

The FTC filed suit claiming Amazon deceived advertisers about its auction mechanics for Sponsored Ads.

Amazon says the complaint centers on generalized second-price auction dynamics that the complaint itself describes as the industry standard for decades.

In no scenario does an advertiser pay more than their bid, Amazon says.

The company argues the FTC reviewed about 1.5 million pages over six years and relies on a handful of simplified communications to allege a companywide deception.

Amazon says advertisers set a maximum cost per click and daily budgets in the Ad Console Campaign Builder, which has stated since 2018 that a bid is the maximum that could be charged.

It says remaining older examples were low reach training videos and courses missed in an audit, later removed or updated.

Three cited training courses had a combined 1,849 enrollments and 779 completions, with one at 23 enrollments and 14 completions, and one video had 928 viewers in 2.5 years, about 0.09% of U.S. Sponsored Ads advertisers.

Amazon also says inbound contacts about auction mechanics stayed very low, even after broad media coverage, with no change in spending.

How Amazon says Sponsored Products pricing actually works

Sponsored Products has used a form of second-price auction since 2006, where winners may pay less than their bid.

Starting in 2014 Amazon tested machine learning relevance models to predict usefulness of an ad given query, placement context and likelihood of engagement, and by 2019 those models were in use across Store advertising.

The ranking now blends relevance and bid, with increasingly more weight on relevance.

To reflect placement value as relevance-heavy winners paid less, Amazon added a hard reserve to cover costs and a soft reserve that estimates true market value.

If the winning bid beats both reserves, the advertiser pays the soft reserve. If it beats only the hard reserve, the advertiser pays their bid.

Amazon says on a typical day it evaluates billions of bids, narrows hundreds of thousands of candidates per search to fewer than 1,000, then scores for ad rank.

In 2024 about 92% of selected Sponsored Products ads were not the highest bid, often by a wide margin, and the mean winning bid was about the 128th highest by amount.

The company says this lowered prices. Average winning bids fell 50% from 2019 to 2025.

Amazon's no-harm data and what it claims shoppers got

From 2019 through 2024 average cost per click for Sponsored Products search ads remained flat when adjusted for inflation, Amazon says.

Conversion rates for individual Sponsored Products advertisers grew 24% from 2021 through 2025.

Even on the FTC's premise that bids stay fixed, Amazon estimates advertisers saved over $8 billion from 2021 to 2025 because relevance outranked bid alone.

For 2026 it estimates the relevance-weighted model will drive at least 58% higher sales than a highest-bid ranking and at least 46% better return on ad spend, with shoppers 58% more likely to see ads they would consider clicking or buying.

On consumers, Amazon says it offers everyday low prices, with shoppers saving over $230 on average last year on essentials through deals, coupons and Subscribe and Save, and that the FTC complaint cites no evidence of price increases.

Why this matters for advertisers and marketplaces

Ad platforms have shifted from bid-first to relevance-first ranking to improve click-through and conversion.

That helps advertisers who optimize to outcomes, since they adjust bids to ROAS and conversion, not to auction explainers.

It also compresses the value of raw bid inflation and rewards listing quality, creative relevance and feed data.

If the FTC prevails on a disclosure theory, every marketplace with reserves and relevance scoring would need to audit how auction mechanics are described in help docs, videos and trainings, not just in the buying console.

What remains unanswered

The complaint's damages model and proposed redress go to advertisers, not shoppers, and Amazon says it assumes no pass-through to consumers.

That frames the test as advertiser understanding and reliance, not downstream price effects.

The docket will need to clarify which statements the court views as material, how it weighs advertiser bid adjustment in practice, and whether generalized second-price auction disclosure has a settled standard.

For startups selling on or buying Amazon ads, watch for any interim disclosure changes and for the court's view on reserves, which Amazon notes are common across the industry.

The near term signal is not price, it is documentation. Amazon says it already updated its Help content after the FTC raised concerns.