Amazon Shares Fall on Report of Impending FTC Lawsuit Over Ad Practices

Amazon.com Inc. (AMZN) shares fell 2.8% on Monday following a Wall Street Journal report that the U.S. Federal Trade Commission plans to sue the company over its advertising practices. The lawsuit, expected to be filed in a Seattle federal court, will reportedly be joined by more than 20 state attorneys general.

Details of the Allegations

The FTC's lawsuit will allege that Amazon deceived businesses by manipulating the auction process for advertisements on its retail platform, according to the report. The agency claims that starting in 2018, Amazon began secretly entering its own bid, known as a "soft reserve," into ad auctions.

This practice allegedly inflated the prices advertisers had to pay. Key claims cited in the report include:

• The "soft reserve" bid was higher than the runner-up bidder's price, artificially raising the final cost of an ad.
• Amazon did not disclose this new practice to merchants, who were unaware they were bidding against the platform itself.
• The strategy allegedly raised pay-per-click ad costs by as much as 50% on major shopping days.

FTC officials said Amazon executives tracked the extra revenue earned from the strategy and attempted to limit internal knowledge of the practice. In recent years, the company has reportedly intervened to raise the minimum price in 70% to 80% of its ad auctions.

Market Context

Ad

The legal challenge targets a significant and growing part of Amazon's business. The company operates the world's third-largest digital advertising platform, behind only Google and Meta Platforms.

According to its securities filings, Amazon's advertising division generated $68 billion in revenue in 2025. The lawsuit raises questions about the sustainability of this revenue growth if the company is forced to alter its auction mechanics.

Pattern of Regulatory Scrutiny

This case marks the third major legal action brought by the FTC against Amazon under its current leadership, signaling persistent regulatory pressure on the tech giant's business model. Last year, Amazon agreed to pay $2.5 billion to settle an FTC lawsuit alleging the company used deceptive practices to enroll customers in its Prime subscription service.

Another significant FTC lawsuit, which alleges Amazon engages in illegal monopolization of the online retail market, is scheduled to go to trial next year. This pattern of litigation highlights the ongoing regulatory risks for Amazon and its investors.