Overview

Amazon has officially responded to a legal challenge from the Federal Trade Commission (FTC) regarding the mechanics of its Sponsored Ads auction system. The company’s rebuttal argues that the FTC’s allegations of harm to both consumers and advertisers are not supported by empirical data and reflect a misunderstanding of modern digital advertising technology. For Amazon sellers, this legal dispute clarifies that the platform's auction logic is increasingly driven by machine learning and product relevance rather than the sheer size of an advertiser's budget.

Key Points

• Relevancy-driven placement — Approximately 92% of Sponsored Products advertisements placed throughout 2024 were won by advertisers who did not submit the highest bid in the auction.
• Stable advertising costs — When accounting for inflation, the average cost-per-click (CPC) for Sponsored Products has remained relatively flat between the years 2019 and 2024.
• Improved conversion rates — Advertisers using Sponsored Products saw an increase in conversion efficiency of more than 24% during the period from 2021 to 2025.
• Massive advertiser savings — Amazon claims that the transition from a bid-centric model to a relevancy-centric model saved advertisers more than $8 billion between 2021 and 2025.
• Reduction in winning bids — The average amount required to win a Sponsored Products search ad placement decreased by 50% from 2019 to 2025.
• Lack of consumer price evidence — Amazon asserts that the FTC's 150-page legal complaint provides no verifiable data to suggest that advertising auction mechanics have caused higher prices for shoppers.

How the Sponsored Ads Auction Works

The Amazon advertising ecosystem utilizes a "generalized second-price" auction model, which has transitioned from simple rule-based software into a complex, AI-driven environment. The process follows these specific stages:

1. Bid Submission — The advertiser defines their financial parameters within the Ad Console Campaign Builder, such as a seller setting a maximum ceiling of $1.00 for a specific keyword click.