FTC Claims Amazon Added Up to 250% Ad Surcharges

Amazon allegedly imposed advertising surcharges of up to 250% during major retail events, according to newly unredacted details the Federal Trade Commission published last week. The filing forms part of the agency's lawsuit accusing the company of secretly inflating ad prices, and it landed days before Amazon stepped up its push into AI-driven campaign automation.

The stakes are large. The FTC says the practices generated an additional $87 million during the 2022 holiday season alone. Amazon reported quarterly advertising revenue approaching $20 billion, and its new AI platform, Amazon Ads Agent, sits at the center of its plan to automate planning, buying and optimization.

What does the FTC allege?

The FTC and 22 state attorneys general accuse Amazon of misleading advertisers about its Sponsored Products auctions. Amazon presented these as generalized second-price auctions, where advertisers pay a price set by competing bids rather than their own maximum bid.

Regulators allege Amazon introduced undisclosed reserve-price mechanisms that raised charges without corresponding competition, pushing outcomes closer to first-price auctions (where the winner pays closer to its full bid). During the 2021 holiday season, average cost per click rose 20%, with some advertisers facing increases above 200%, according to the complaint. Executives also allegedly considered using reserve prices to close a $40 million revenue shortfall.

Amazon disputes the allegations. The company says reserve prices reflect the value of its placements and argues reserve pricing is not inherently unlawful. The case continues.

The core advertiser problem is simple: buyers can see what they paid but cannot independently establish how the price was calculated.

Why does this matter for Amazon's AI tools?

The allegations surfaced shortly after Amazon's October unBoxed conference, where it unveiled Ads Agent and Full-Funnel Campaigns. Advertisers set objectives, products, creative and budgets; Amazon's technology handles targeting, allocation and optimization.

Amazon says beta testing delivered up to 67% higher return on long-term ad spend and 29% lower costs per new-to-brand customer versus manually configured campaigns. Those figures are company-reported, and critics are likely to call the system a "black box."

The FTC's case concerns Sponsored Products auctions, not the new AI products. But it compounds concerns about advertisers' ability to inspect automated decisions, verify results and understand fees — precisely the reliance Amazon's new tools demand.

How does the Google comparison hold up?

A federal court found Google illegally monopolized publisher ad-serving and ad exchange markets; in a separate case, its search practices were also ruled monopolistic. Remedies avoided divestiture but imposed measures meant to improve competition and interoperability.

Both cases involve platforms whose control over advertising infrastructure limits customers' scrutiny of transactions. The difference is timing: Amazon is asking advertisers to cede more buying control to its technology while regulators challenge the transparency of its existing auctions.

What did the market say?

"We're having to look much more closely at what happens after the click and whether those clicks are actually producing qualified leads and revenue," said Lindsay Marty, founder of Above the Bar Marketing, speaking to Digiday about advertisers reassessing Google Search budgets.

What do the ChatGPT numbers show?

Separate studies suggest OpenAI's ad rollout is scaling fast but converting poorly:

• Adthena tracked 6,333 distinct brands advertising on ChatGPT in August, up from 1,082 in June, across the U.S., U.K., EU and Australia.
• Advertising reached 43.4% of ad-eligible U.S. ChatGPT users, per Similarweb and Graphite, versus 45.7% in the U.K. and 27.8% in Mexico.
• U.S. ecommerce advertisers generated $0.89 per paid ChatGPT visit versus $2.45 from paid Google Search, per research by Maximilian Kaiser and Christian Schulze.
• The same working paper, still under review, put ChatGPT's paid-traffic conversion rate at 0.37% versus 1.17% for paid Google Search.

Elsewhere, Taboola entered mediation with Yahoo over their 30-year native ad deal alongside weak quarterly revenue, and Forrester's Wave report found diminishing differentiation among the 12 largest agency groups. Amazon, for its part, will keep betting that agentic AI fuels the next phase of its ad growth — and that advertisers accept oversight they currently cannot independently perform.