In 2007, NBA referee Tim Donaghy became the nightmare every sports fan dreaded- he had been betting on games he was officiating. Yes, he was on the court calling fouls. He also had money riding on what happened next.

More than a million Amazon sellers are now staring at an e-commerce version of that scandal.

Merchants have been questioning their costs on Amazon for years. They have watched competition get fiercer, launches get harder, and the cost of staying visible climb. So, the unease was already there. As one disappointed Amazon seller shared:  

“Conversion rate isn't improving much, new product launches are harder than before and competition keeps getting more intense. And at the same time, it feels like we're building everything on rented land.”

Well, if you’ve been following the latest e-commerce news, that aged rather badly.  

On August 31, 2026, the FTC and 22 states sued Amazon, alleging that Amazon spent more than seven years secretly inflating prices in its advertising auctions, likely extracting tens of billions of dollars from advertisers.

And then there’s the detail that makes you stop in your tracks. The complaint says Amazon used an “invented auction participant” to push prices higher. All this time, advertisers thought they were competing against other bidders. What they were really bidding against was an invincible ghost of Amazon’s making.  

Look back at years of seller math through that lens, and suddenly those “competitive” ad costs look a lot less innocent.

On one hand, Amazon can still put a product in front of an enormous pool of customers, give a new launch a running start, and create demand that would take years to build independently.

But when the referee and the rulebook all belong to someone else, it pays to know exactly what game you are playing.

So, read on to understand exactly what this FTC move signals for your store.

What really went down with Amazon’s ad auctions?  

Before jumping into the ghost bidder, it helps to understand how the auction happened in the first place.

Amazon ran what is called a second-price auction, the same basic idea behind eBay’s automatic bidding. You tell the system the most you are willing to pay for a click. If you win, you do not pay that full amount. You pay a hair above whatever the runner-up bid, or as Amazon put it, “one cent more than the next highest bidder.”

A design that rewards honesty. Pretty sweet deal, right?  

And as far as a first-price auction is concerned, you simply pay whatever you bid, and you learn to lowball and inch up so you never overpay. A second-price auction tells you to relax and bid what the click is genuinely worth, because the runner-up sets the final price, not you. So that is precisely what a million advertisers did. They bid their true number and trusted the system to protect them from it.

This moment is where the story turns. The FTC alleges that in 2019, Amazon slipped an extra fee into the math, something it called a “soft reserve price” in its own documents. In plain English, it invented a runner-up. A phantom bidder seated just beneath your maximum, quietly shoving the “second price” you paid closer and closer to the first.  

By 2024, advertisers were handing over their full bid roughly 80% of the time. Second-price in name, first-price in your wallet.

And they knew when your wallet was at its fattest. The complaint says Amazon pushed these surcharges hardest during peak events like Prime Day and Black Friday, the two windows you can least afford to sit out.

Now, unsurprisingly, Amazon calls the suit misguided. Its defense is that the FTC misunderstands how advertisers actually behave, since sellers adjust bids based on what converts, not on a description of the auction’s plumbing.  

But Amazon does not deny that the reserve price exists. The fight is over whether hiding it crossed a line.

The rigged auction is only a part of your problems

See, sensational headlines make the whole thing look like the grander monument to our undoing. But a quieter and perhaps harder-biting problem is the one sellers have been muttering about for years, long before the FTC even showed up.

The “poetic” version is one you would find on unfiltered Reddit threads:

“Take it from an OG on Amazon (almost 18 years), Amazon used to be amazing. They cared about their sellers, they cared about their customers and they were a great place to sell, buy, and use for legit reviews. Amazon is now a dumpster fire.”  

But if you were to put cold statistics to that reality, research estimates that once you stack referral fees, fulfillment, storage, and the advertising you cannot skip, Amazon’s cut can pass 50% of your revenue.  

Yes, revenue, not even profits. If the government had taken half of a business’s revenue this way, instead of a multibillion-dollar corporation with little accountability, people would be out in the streets.

And the problem is not just how much Amazon takes. It is how often the terms seem to shift underneath you. In early 2026, Amazon added a fuel surcharge, changed how ad costs were deducted, and pushed payouts later, all within a few weeks. Sellers responded with a 24-hour ad boycott. For whatever little it is worth, Amazon delayed the ad-payment change from April to August after the backlash.

Competition has changed the game too

The fight for the customer’s eyeballs has become a lot harder. Getting listed used to be the hard part. Now, getting noticed is.

Chinese sellers now account for 55.9% of Amazon’s top 10,000 sellers, up from 42.5% in 2020. New seller launches hit a decade low in 2025, down 44% in a year. Getting onto Amazon is no longer the same as being found on it.

And the room is getting more exclusive. Fewer than 8,000 sellers, about 1.6% of the active base, now drive half of Amazon's US third-party sales, down from roughly 15,000 three years ago. Amazon can be a wonderful place to scale a business you already know how to run. It can be a tough place to start a whole new one.

But somewhere underneath that growing pile of Amazon baggage is the part that stings the most: the customer relationship you never quite get to keep.

Amazon owns the checkout, the messaging, and most of the data around the person who just bought from you. You can spend years and a small fortune bringing a customer in and still walk away without a direct relationship with them.

You are renting the shelf and, to a large extent, the shopper too. So, one bad auction is something you can appeal. Building a business where the fees, the competition, and the customer all sit outside your control is a much harder problem to unwind.

How to diversify your options and improve ownership?

Many seller stories genuinely end with some version of, “I hate Amazon.”

But even after the latest allegations, the more interesting ones sound less like a bitter breakup and more like one where both sides admit the relationship was good for a while. One seller who had been on Amazon since 2013 put it this way:

“Amazon did provide me access to millions of potential customers. I don’t think I would have been this successful if not for Amazon….I will look forward to having my life back in the sense I can just go on vacation without looking at my phone only to see some “return authorization” email from Amazon....I have discussed with my kids to look at Amazon as a way to make a few extra bucks on side. DO NOT think this as a 20+ year career. I would say this to ANY seller on Amazon.”

That tension and discretion is probably the most honest way to think about marketplaces. They can be enormously good for your business and still be a terrible place to put all of it.

Another Amazon seller laid out what that dependence looked like in numbers. From 2017 to 2024, roughly 99% of his sales ran through Amazon, averaging $43 million a year at a 7% margin. Then the squeeze set in - return scams, climbing fees, competitors locking up his best listings, cheap knockoffs riding on deceptive titles.

So in 2023, he started the slow, expensive move to his own website. The rebuild cost around $650,000 and took the better part of a year. He hired an in-house SEO lead, set aside $65,000 a month for advertising and brought on three packers to replace what FBA used to handle.

Then comes the number that should make you sit back.

His 2025 sales were down roughly 18% year over year.

His profit was up nearly 230%.

You read that right; he sold less and kept far more. Once he replatformed, in his words, “the race to the bottom in my niche was over.” His Amazon rivals still keep knifing each other on price while he raised prices on his own site and watched his margins climb. The customers became his. The scam returns fell to almost nothing.  

And as much as you’d think this is an argument for abandoning Amazon tomorrow, it’s really not. It is an argument for knowing what dependence costs you before deciding how much you can afford.

The Amazon case makes that calculation even more important. The FTC alleges sellers were paying more inside an auction whose mechanics they could not fully see. Amazon disputes those allegations. Either way, the lesson for merchants is straightforward: the platform can tell you what you paid. You still need your own system for deciding whether it was worth it.

That means looking past topline revenue to the numbers Amazon cannot define for you: true contribution margin, blended ad costs, return rates, the real cost of fulfillment, and the one that matters most, how much of your business would survive if the platform rewrote the rules tomorrow. The more of those numbers you can calculate independently, the less likely you are to mistake marketplace growth for business health.

And if higher margins would make that transition a little easier, let us sweeten the deal. SureBright can add an additional revenue stream to the sale while giving you something Amazon never quite lets you keep: a reason to stay connected to the customer after checkout. The customer gets protection when something goes wrong. You get the relationship and a little more of the economics back in your hands.