You were bidding against nobody.

Happy Friday,

Every bidding rule you have ever been taught rests on one sentence.

On Monday the FTC filed a complaint arguing that the sentence was not true.

The rule is this. In a second-price auction, the winner pays one cent more than the next highest bid. Not their own bid. The runner-up's.

That mechanic is the reason anyone bids an honest maximum. If you can only be charged what the next person was willing to pay, telling the truth about your ceiling costs nothing, and shading your bid loses auctions you would have won profitably.

Amazon described its auctions that way for years. In help pages, in training videos, and in person, through hundreds of sales staff. Bid your true value. The auction protects you.

On August 31, the FTC and 22 state attorneys general sued Amazon in Seattle federal court, alleging that from 2019 Amazon added an undisclosed charge on top of the auction price. The complaint says Amazon's internal name for it was a "soft reserve price."

The complaint alleges the number you were bidding against was frequently not a bidder. It was an output.

According to the complaint, Sponsored Products advertisers paid their own winning bid roughly 80% of the time by 2024 — up from 30–40% in 2021, and 70% in 2022. A second-price auction that charges first price about four times in five is a first-price auction with a nicer name.

The complaint quotes internal documents describing an "invented auction participant" used to raise prices, and an Amazon Ads executive explaining that the price was not set by an actual bidder but was a proxy second price the company calculated. It also alleges the surcharges were increased more aggressively into high-volume days. Prime Day. Black Friday.

And it alleges Amazon understood exactly why this had to stay quiet: if advertisers learned the auction was not what they had been told, they would start shading their bids, and the revenue would come back down.

The secrecy was not a side effect of the scheme. The complaint alleges it was the operating requirement.

Amazon denies all of it. Its statement says the case attacks generalised second-price dynamics that have been the industry standard for decades, and that in no scenario does an advertiser pay more than its own bid. It says the FTC reviewed roughly 1.5 million pages and built the case on a handful of simplified internal messages. It also estimates that advertisers saved more than $8 billion between 2021 and 2025 because Amazon ranks on relevance rather than bid alone.

That defence is narrower than it sounds. Nobody paid more than their bid. That is exactly what a first-price auction does.

Here is the part that is actually yours. None of this is proven, nothing changes in the console this morning, and the case will outlive your Q4. But every bid-strategy doctrine of the last seven years was tuned to a rule the government now disputes. Your spend was real. Your sales were real. Your history is still the best data you own. What may be wrong is the story you told yourself about why a bid was safe.

THIS WEEK IN AMAZON DOING AMAZON THINGS

France started charging. The anti-fast-fashion levy went live September 1, a per-item charge climbing toward roughly €20 a garment by 2030. Your cheapest competitor's floor moved for the first time in three years.

Shein listed in Hong Kong on September 1 at about $26 billion, roughly 70% below its 2022 peak. The company that set the price floor in your category is worth a third of what it was.

Amazon is helping fund a Texas gas plant for AI data centre capacity. Emissions are up 16%. The net-zero date has not moved.

Owner: whoever sets your bids.

One thing first, or this wastes a morning. The Sponsored Products targeting report does not contain your bid. Go to Campaign Manager, open bulk operations, request Sponsored Products for the last 30 days with performance data, and download it. Bids, bidding strategy, placement multipliers and CPC all arrive in one file.

Now build the sample, because this is the part that decides whether the number means anything.

Keep only keywords in campaigns set to fixed bids, with no placement adjustments. Bidding strategy sits on the campaign rows; the multipliers come through as bidding-adjustment rows in the same file. Drop everything on dynamic up-and-down — that setting lets Amazon raise your bid by as much as 100% at top of search, so a high ratio there is measuring your own configuration, not the auction. Drop anything under 30 clicks for the month.

From what survives, take the top 25 by spend and divide average CPC by bid.

A result near 1.00 means your bid is functionally the price on that term. That is not proof of anything the FTC alleged — a real second-price auction returns the same number whenever the runner-up is bidding right behind you. What it tells you is narrower and more useful: on those keywords, bidding your true maximum is buying you no protection at all.

So test it. Take the five highest ratios, cut each bid by 10%, and leave everything else alone.

Read the result on impressions and average CPC only, against the same five keywords the week before. Not sales, not ACOS — attribution is still settling and will tell you a story that reverses in a fortnight. If impressions hold and CPC falls, you were paying for a belief. If impressions drop, restore the bids Monday, and one week of position on five keywords is what it cost to find out.

Run it this week. Nobody should be testing bids after October 15.

See you Tuesday.

Any questions? Book a meeting with me here.

Dan Head

Founder, AMZ Elite

P.S. — If you run the ratio and five terms come back at 1.00, forward this to whoever sets your bids. They will want fifteen minutes.