Amazon Secures Victory in FTC Antitrust Scrutiny Over Prime and Ad Practices

RICHMOND, CALIFORNIA – JUNE 21: The Amazon Prime logo is displayed on the side of an Amazon delivery truck on June 21, 2023 in Richmond, California. The Federal Trade Commission (FTC) sued Amazon alleging that company has deceived millions of customers into signing up for Prime subscription services and intentionally complicated the cancellation process. (Photo by Justin Sullivan/Getty Images)

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The widespread popularity of Amazon among sellers and buyers has attracted the attention of the Federal Trade Commission (FTC). The agency alleges that Amazon has artificially inflated seller ad prices to attract more attention from Amazon customers. These claims are difficult to verify.

Although the FTC asserts that Amazon has manipulated the auctions used to set ad prices since 2018, the company has actually increased price transparency in a market where visibility is highly valued. Prospective sellers recognize that sponsored products and sponsored ads on Amazon can generate significantly more clicks and sales, prompting them to secure favorable ad pricing.

The FTC’s accusations suggest that Amazon controls the ad market on Amazon.com, yet in practice sellers determine their bid levels based on prior performance and evolving consumer behavior, including daily, seasonal, and promotional factors. Ultimately, sellers’ bids reflect their own historical success and anticipated future sales, not directives from Amazon.

Sellers naturally raise their bids when their products are in high demand or when search interest peaks, and the cost of those bids is also influenced by broader economic conditions—prosperity increases the value of ad space, while economic downturns reduce it. Although the composition of sponsored ads and products fluctuates with economic vitality, Amazon does not dictate these prices; it merely provides market information.

The FTC’s interest stems from Amazon’s provision of proprietary market insights, which it views as giving the company an unfair advantage in second‑price auctions where sellers bid their maximum willingness to pay. The agency argues this structure enables Amazon to elevate ad prices, though Amazon itself does not set the final prices.

Nevertheless, the FTC contends that Amazon artificially inflates seller prices by effectively acting as its own auction participant. In reality, Amazon leverages its deep understanding of buyer behavior to stimulate competitive, well‑informed bids for ad space, aligning bidder behavior with prevailing market demand.

In a second‑price auction, sellers are not only expressing their maximum bid but are also guaranteed that they will pay at most one cent above the second‑highest bid, safeguarding them from overpayment.

Amazon’s contribution of crucial market intelligence enables sellers to make more informed bidding decisions, thereby increasing their chances of securing ads that drive maximum sales. The FTC should note that sellers’ primary objective is to maximize revenue through effective ad placement.

By integrating its market knowledge into the bidding process, Amazon ensures that sellers can place ads at optimal prices and times to maximize sales, which in turn benefits Amazon’s own business.

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