If you buy things on Amazon, some of what you paid covered an advertising bill you never saw on the receipt.
That is not a hunch. It is the government’s own claim. The FTC and 22 state attorneys general sued Amazon on August 31, and the filing says the inflated ad costs at the center of the case “were largely passed on to American consumers.”
Here is how the machine worked, according to the complaint.
Sellers bid against each other for the “Sponsored” slots at the top of your search results. Amazon told them it ran a second price auction, meaning the winner pays one cent more than the next highest bidder. That design is the reason advertisers trust an auction they cannot see. You can bid your true maximum without fear, because you will almost never actually pay it.
Starting in 2019, the FTC says, Amazon slid in an undisclosed “soft reserve price.” Internally it called the output a “proxy 2nd price,” and the agency says it was calculated using an “invented auction participant.” Read that again. A bidder that did not exist, bidding against people who did.
The numbers tell you it worked. The share of auctions where the winner paid its own full bid instead of a penny over the runner-up ran about 30 to 40 percent in 2021, jumped to roughly 70 percent in 2022, and hit approximately 80 percent by 2024. Over seven-plus years, the FTC puts the take at tens of billions of dollars from more than a million advertising customers, over 500,000 of them small and mid-size businesses.
FTC Chairman Andrew Ferguson put it this way: “Amazon has millions of advertising customers who were misled into paying significantly higher prices.”
Now the part that lands on you.
Nobody pays for ads out of goodwill. Advertising is a line item, and a seller who spends more to win the same slot prices that back into the product. The FTC has not published a per-shopper dollar figure, and neither will we, because that number does not exist yet. But the direction is not complicated, and the agency stated it plainly in its own release.
Fair is fair: these are allegations. The case was filed in the U.S. District Court for the Western District of Washington and Amazon has not been found liable of anything. Treat it as a serious claim by 23 government plaintiffs, not a verdict.
The move here is not to boycott anything. It is to stop treating the top of the page as a recommendation.
Scroll past the first band of results before you decide. Those are labeled “Sponsored,” and now you know what that label cost. Sort by price per unit rather than the default relevance ranking, which is the setting the whole auction exists to influence. Then check the same item at one other retailer before you tap buy. Two minutes, and it takes the auction out of your decision entirely.
This is the second time in a month the FTC has gone at how much of a price is set by things you cannot see. The other one is its proposed policy statement on personalized pricing. Different mechanism, same question: how much of your price is about you, and how much is about them.
If you want to know what the Sponsored row is quietly doing to your monthly total, run a month of orders through our budget planner and look at the category, not the individual charges. That is where it shows up.
How Candid Yak makes money. Some of the products we write about pay us if you apply or sign up through our links. That never changes our verdict, our rankings, or the numbers in this article. We call a bad deal a bad deal whether it pays us or not. Some brands shown in our comparison tools are placeholder examples while we finalize partner agreements, and we label them as such.