The Federal Trade Commission is investigating Amazon over allegations that it misled advertisers about how its search advertising actually works. The probe centers on whether the company was upfront about pricing terms and the mechanics of its ad auctions.

The investigation, which also reportedly encompasses Google, zeroes in on a specific practice: whether Amazon adequately disclosed its use of “reserve pricing” for certain search ads. In English: did Amazon tell advertisers there was a hidden price floor they had to clear before their ads would even show up?

What the FTC is actually looking at

Reserve pricing in ad auctions is like a secret minimum bid at a Sotheby’s auction. Advertisers think they’re competing against each other in a fair market, but the platform has quietly set a floor price that ensures it captures a certain margin regardless of competitive dynamics.

This isn’t the FTC taking a casual interest. The agency has been on something of a tear when it comes to Amazon’s business practices. In September 2025, Amazon reached a $2.5 billion settlement with the FTC over allegedly deceptive practices related to its Prime subscription service. That deal included $1 billion as a civil penalty and $1.5 billion earmarked for consumer refunds, which began processing in late 2025 and early 2026.

As of June 2026, no formal lawsuit has been filed related to the advertising probe.

Why Amazon’s ad business matters so much

Amazon’s advertising arm has become the third-largest digital advertising platform in the US, behind only Google and Meta.

The broader investigation also touches Google, suggesting the FTC is looking at systemic issues across major digital advertising platforms rather than singling out one company.

What this means for investors

The $2.5 billion Prime settlement provides a useful reference point for the scale of penalties the FTC is willing to pursue against Amazon. The research notes that claims of potential “billions of dollars in penalties” related specifically to the advertiser probe are not supported by current reporting.

The timeline is the critical variable to monitor. As of now, no formal lawsuit has been filed related to the advertising probe, and investigations of this complexity can take months or years to resolve.