The FTC says Amazon ran an ad auction, got an answer, then replaced it with a higher price it set itself. The complaint landed in Seattle on August 31 with 22 state attorneys general attached and runs 181 pages. The agency puts the money involved above $20 billion.

Amazon answered the next day with a blog post. Average winning bids on its search ads fell 50% between 2019 and 2025, it said, while the inflation-adjusted price advertisers actually paid held flat. Both figures are Amazon's own. A 50% drop in winning bids should show up in what advertisers pay, and it did not.

Amazon's internal documents call the mechanism a soft reserve, a floor applied after the bidding closes. Its own pricing page told advertisers they were in a second price auction where the winner pays a penny more than the runner-up and nothing beyond that. Under a soft reserve the winner pays their own bid. Amazon tracks how often that happens in a metric called first price rate, which sat at 4% in late 2020 and appears at close to 80% in the internal operating plan for 2024.

Amazon says reserve prices kept placements priced at what they are genuinely worth. The FTC says the floor was set at whatever Amazon could collect without advertisers noticing.

Also this week, Target's ad business and marketplace now report to a marketer who came out of hotels, and BigCommerce's parent is planning cost cuts worth a fifth of its revenue. PayPal is running its turnaround with two interim bosses. The Investor Minute carries five items from venture, M&A and the IPO market.

This episode is sponsored by Avalara, which says its Agentic Tax and Compliance product automates tax calculation and gives sellers visibility into tariffs and duties across Shopify, BigCommerce and WooCommerce. Details at avalara.watsonweekly.com.