FTC Challenges Amazon’s Sponsored Ads Pricing as Brands Reassess Bid Limits

The FTC Puts Amazon’s Reserve Prices Under Scrutiny

The Federal Trade Commission and 22 state attorneys general filed suit against Amazon on August 31, 2026, alleging that the company secretly increased advertising auction prices. The case was filed in the U.S. District Court for the Western District of Washington.

According to the FTC’s announcement, Amazon introduced undisclosed “soft reserve” prices beginning in 2019. Regulators allege these calculated prices pushed advertiser charges above what competing bids would otherwise have produced.

The complaint challenges the gap between Amazon’s descriptions of second-price auctions and what advertisers actually paid. The FTC alleges that Sponsored Products advertisers paid their full winning bid approximately 80% of the time in 2024.

These are allegations, not court findings. The filing itself does not establish an entitlement to refunds or announce a new pricing policy.

Amazon Says Relevance and Reserve Prices Improve Results

In its August 31 response, Amazon rejected the allegations and defended an auction system that considers both relevance and bid value.

Amazon describes two pricing thresholds:

• Hard reserve: The minimum a bid must exceed to enter an auction.

• Soft reserve: Amazon’s real-time estimate of a placement’s market value.

Under Amazon’s explanation, a winning advertiser whose bid exceeds both thresholds pays the soft reserve. If the bid clears the hard reserve but falls below the soft reserve, the advertiser can still receive the placement and pay its bid.

Amazon also says inflation-adjusted average cost per click for Sponsored Products search ads remained flat from 2019 through 2024, while conversion rates increased 24% from 2021 through 2025. Those are company-reported figures, rather than independent findings resolving the dispute.

The company says it updated Amazon Ads Help content to explicitly explain reserve prices after the FTC raised concerns.

The Seller Decision: Set Bids You Can Afford to Pay

Source

For established brands, beBOLD Digital’s practical takeaway is to review the economics behind each bid.

A bid entered with the expectation of paying substantially less can expose a campaign to costs its margins cannot support. Understanding Amazon PPC costs and budgeting helps connect auction decisions to actual profitability.

Consider an illustrative product that leaves $12 per order after product costs, marketplace fees, fulfillment, and other variable costs, before advertising. At a 10% click-to-order conversion rate, its advertising break-even CPC is $1.20. A profitability target would require a lower ceiling.

Brands should prioritize three checks:

• Review bidding settings. Account for automated increases and placement adjustments when assessing potential spend. Amazon’s dynamic bidding guide confirms that up-and-down bidding can raise bids above the amount initially entered.

• Evaluate results by ASIN and placement. Use Amazon advertising reports to examine performance beyond account-wide averages. Track CPC alongside Amazon conversion rate, cost per order, and contribution margin.

• Test changes in a controlled way. Adjust selected targets and compare sales volume and profitability before applying broad reductions. Use ACOS calculations to assess advertising spend relative to attributed sales, then compare that ratio with the product’s margin.

Campaign reports can identify deteriorating economics. They cannot, by themselves, prove that a particular click included an unlawful charge.

beBOLD Digital’s Take: Connect Auction Exposure to Product Margins

The immediate priority is to make every campaign’s spending limits defensible. An Amazon PPC audit can organize that review around campaign settings, targeting, and wasted spend.

For beauty brands, bid decisions should account for differences between individual products, bundles, promotional discounts, and expected repeat purchases.

Keep profitable campaigns working while testing areas where acquisition costs exceed the product’s economics. Explore beBOLD Digital’s Amazon PPC management services to align bidding, campaign performance, and product margins or contact our team today for a one-on-one consultation.

Sources

• Federal Trade Commission: FTC, States Sue Amazon Over Secret Ad Surcharge Scheme

• Amazon: Amazon’s Response to the FTC’s Lawsuit Regarding Sponsored Ads

• Forbes: Amazon Fires Back After FTC Claims Its Hidden Reserve Price Auctions Inflate Ad Costs

• Amazon Ads: Guide to Dynamic Bidding—Up and Down With Sponsored Products