Tommaso Bondi

Assistant Professor of Marketing

Tommaso Bondi, a professor of marketing at Cornell Tech and at the SC Johnson Graduate School of Management, says advertising is no longer a side business for Amazon.

Bondi says:

“At nearly $70 billion a year, it's the third-largest ad platform after Google and Meta, and far higher-margin than retail. The FTC's allegations cut at the heart of how that money is made. In a second-price auction, winners pay just enough to beat the runner-up; secretly raising the price floor works exactly like planting a fake bidder in the room, inflating prices without any real competition behind them. 

“Because these auctions are black boxes, advertisers had little ability to detect it - trust is the whole product. Essentially, bidders were bidding as if they were in a second price auction (that is, they were bidding truthfully), but the auction closely resembled a first price one. Advertisers likely didn't bear this cost alone: for most sellers, advertising is now a cost of doing business on Amazon, and inflated ad costs ultimately show up in the prices consumers pay.”

Thomas Jungbauer

Assistant Professor of Strategy and Business Economics

Thomas Jungbauer, professor of strategy and business economics at the SC Johnson College of Business, says the FTC isn’t challenging Amazon’s use of reserve prices.

Jungbauer says:

“The FTC’s core allegation is not that reserve prices used by Amazon are improper,

but that Amazon described a second-price auction while secretly inserting a platform-set threshold that often made winners pay their own bid. In repeated, opaque auctions, an advertiser seeing unexpectedly high prices may infer that rivals value the same consumers more highly, raise future bids, and amplify the surcharge. The clearest immediate harm is to advertisers. 

“Whether consumers paid more as a result depends on pass-through, margins, and competition, and is not yet established. Advertiser-sponsored positions are not necessarily anti-consumer: well-designed ads can improve matching, reduce search costs, and help valuable new products overcome the cold-start problem. The issue is transparency and commitment to the announced rules.”

Cristobal Cheyre

Assistant Professor

Cristobal Cheyre, assistant professor of information science at Cornell Bowers, says the distinction between second and first price auctions matters a great deal.

Cheyre says:

“The distinction matters because it affects how advertisers should bid. It may lead advertisers to bid less cautiously than they otherwise would and can also give them the impression that competition is stronger than it is. 

“Advertising is smaller than Amazon’s retail and cloud businesses, but it is still a nearly $70 billion business and particularly valuable because additional advertising revenue can be generated at relatively low incremental cost. For sellers, higher ad costs can be substantial and may ultimately be reflected in consumer prices.”