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Amazon has used a hidden soft reserve in its ad auctions since 2019, and the company doesn't dispute that part. The lawsuit will turn on whether it cost advertisers anything.

On August 31, the FTC and 22 state attorneys general sued Amazon in federal court in Seattle. The case covers Sponsored Products, Sponsored Brands, and Display ads, bought by roughly 1.2M advertisers, more than 500K of them small and midsize businesses. The FTC estimates Amazon's pricing added more than $20B to their ad bills since 2019.

Amazon sold these placements as a second-price auction, where the winner pays a penny more than the runner-up. In 2019 it added a soft reserve on Sponsored Products, its own real-time estimate of what a placement is worth. When a winning bid cleared that number, the advertiser paid the soft reserve instead of the second price. Advertisers couldn't see it, and Amazon didn't disclose it on its site until years later. One internal document quoted in the complaint calls it an "invented auction participant."

According to the complaint, Sponsored Products advertisers who won an auction paid their full bid 30 to 40% of the time in 2021. By 2022 that was about 70%, and by 2024 it was close to 80%. I've heard sellers complain about this for years, usually with no way to prove it.

Amazon posted its rebuttal the same day. The company says Sponsored Products CPCs were flat after inflation from 2019 to 2024 and that conversion rates rose more than 24% from 2021 to 2025. It also says average winning bids fell 50%. A long section of the post explains how sellers struggled to be found before Amazon ads existed, which Jess called the Genesis chapter on Friday's show.

I'd take Amazon's numbers more seriously if they came from someone else. Every one is self-reported and measured inside the same black box the FTC is suing over, and flat CPCs sit awkwardly next to an ad business that brought in more than $68 billion last year.

The complaint also quotes Amazon worrying that disclosure could cause "irrevocable damage to advertiser trust." I read that as Amazon knowing how advertisers would react if they found out. Agencies managing Amazon budgets should have that line in front of them the next time they plan bids.

Amazon isn't the bad guy, per se, but it isn't your friend. If the soft reserve goes away, it can raise storage fees or add a fuel surcharge whenever it wants.

Check your own data before trusting either side. Pull your Sponsored Products reports for the past three years and see how often your actual CPC matched your max bid. If that share climbed the way the complaint describes, your max bid has been working as the price for a while, and your bidding should reflect that.

This is FTC Chair Andrew Ferguson's second big Amazon case after last year's $2.5B Prime settlement, and it lands a few weeks before the midterms. Texas filed a separate suit over the same conduct on the same day.

The FTC is asking for restitution. Nobody has explained yet how a court works out what a seller should have paid in an auction where the price-setting bid was never visible to the people bidding.

Toys R Us will open 120 stand-alone stores in the U.S. this holiday season, bringing its count to 160. The company liquidated all of its American stores in 2018, and since 2021 it has been owned by WHP Global, a brand management company. Going from about 40 locations to 160 in a few months is a big jump for a name that has mostly lived on licensing deals and shop-in-shops.

Go Retail Group is the operating partner. Last year the two opened just over 30 stores, and that batch included flagships and seasonal holiday shops. The press release doesn't say how many of this year's 120 will stay open after the holidays, and I'd like to see that figure.

Some of the new stores will have Creator Studios, where influencers and toy brands can make content on site. I think WHP cares more about this than about the candy shops or cafes, since a brand owner benefits when the Toys R Us name gets seen, whether or not people buy anything in that store.

FAO Schwarz opened an Amazon storefront this week. WHP hasn't said what sales or traffic numbers would make this expansion worth it.