Retail Media Auction Pricing Is Becoming A CMO Risk

The US Federal Trade Commission and 22 state attorneys general sued Amazon on August 31, alleging the company secretly inflated prices in its sponsored-ad auctions for more than seven years. Amazon disputes the allegations and says its auction design improved advertiser performance.

The case is still an allegation, not a finding. But it puts a basic media-buying question into the boardroom: can an advertiser meaningfully govern spend when the platform selling the inventory also controls the auction logic, the price signals and the performance report?

What Regulators Allege

The FTC said Amazon represented its Sponsored Products, Sponsored Brands and Display Ads as second-price auctions, where a winner pays only enough to beat the next-ranked bid. Its 181-page complaint alleges Amazon added an undisclosed "soft reserve price" beginning in 2019 and charged Sponsored Products advertisers their own winning bid close to 80% of the time.

Regulators say the practice affected roughly 1.2 million advertising customers, including more than 500,000 small and medium-sized businesses, and extracted tens of billions of dollars. FTC Chairman Andrew Ferguson said advertisers were "misled into paying significantly higher prices."

The distinction matters because auction rules shape bidding behaviour. If buyers expect a true second-price mechanism, they can bid closer to what a click is worth. An undisclosed reserve or platform-set proxy price changes that calculation and makes historical cost benchmarks harder to interpret.

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Amazon Says Performance Tells A Different Story

Amazon's response says the FTC relied on outdated or simplified training materials and misunderstood a system that ranks ads by relevance as well as bid. "There is no advertiser harm either," the company said.

Amazon reported that average winning bids for Sponsored Products fell 50% from 2019 to 2025, while conversion rates rose 24% from 2021 to 2025. It also said about 92% of ads placed in 2024 were not the highest bid and estimated its relevance-led model could deliver at least 46% better return on ad spend in 2026.

Those figures address outcomes, but they do not settle the disclosure question. A platform can improve conversion while still leaving buyers unclear about how prices are formed. For CMOs, performance and transparency are separate procurement tests.

Auction Disclosure Is Becoming An Industry Standard

Amazon is not alone in facing pressure over auction mechanics. In July, IAB Tech Lab released final programmatic auction definitions after work with the Media Rating Council, Omnicom Media Group, ANA, WFA and 4A's. The accompanying standard aims to ensure "auction rules and outcomes are understood for all parties."

That context makes the Amazon case more than a dispute over one retailer's training copy. It points to a widening gap between automated buying systems and the information clients receive about reserve prices, ranking criteria and rule changes. Platforms retain leverage when advertisers optimise to reported return without being able to reconstruct the price-setting process.

Amazon's advertising business makes that gap commercially significant. Reuters reported second-quarter ad sales of US$19.8 billion, up 26% year on year. At that scale, auction governance is not an ad-operations footnote. It is a material budget control.

What APAC CMOs Should Change

The lawsuit concerns US conduct, so regional leaders should not assume it proves how Amazon or any other retail media platform prices auctions in Asia. The procurement lesson still travels. APAC teams buying across Amazon, Shopee, Lazada, Tmall, Flipkart or quick-commerce networks often depend on platform-specific dashboards and cannot compare auction rules on equal terms.

CMOs should require written definitions of auction type, reserve-price use, relevance scoring and the maximum charge relative to a submitted bid. Contracts should also require notice when pricing logic changes, access to placement-level cost data, agency audit rights and a process for reconciling discrepancies between auction documentation and campaign results.

The FTC case may take years to resolve. The immediate executive decision does not need to wait: retail media suppliers should be assessed on how clearly they explain the price, not only on the return they report.