FTC Says Amazon Added Up to 250% Ad Surcharges as It Pushes AI Buying

Amazon imposed surcharges of up to 50% on ordinary shopping days and 250% during major retail events, generating an extra $87 million in the 2022 holiday season, according to newly unredacted FTC lawsuit details published last week. The allegations land just as Amazon asks advertisers to hand more buying decisions to its AI, and that collision defines the moment for anyone spending on the platform.

The FTC and 22 state attorneys general accuse Amazon of misleading advertisers about its Sponsored Products auctions (the pay-per-click listings that appear in shopping results). Amazon presented these as generalized second-price auctions, where advertisers generally pay prices set by competing bids rather than their own maximum. Regulators allege Amazon introduced undisclosed reserve-price mechanisms (minimum prices that must be met before an ad sells) that raised charges without corresponding competition, effectively pushing the auctions closer to first-price dynamics.

The numbers in the complaint are blunt. During the 2021 holiday season, Amazon allegedly increased average cost per click by 20%, with some advertisers seeing increases exceeding 200%. The complaint also alleges executives considered using reserve prices to close a $40 million revenue shortfall.

Amazon disputes the allegations. The company maintains that reserve prices reflect the value of its ad placements, rejects the FTC's interpretation, and argues reserve pricing is not inherently unlawful. The legal proceedings are ongoing.

What does this change for advertisers?

The core problem is verification, not legality. Advertisers can see what they paid, but they can't establish how the price was calculated. That matters more now because Amazon is actively asking marketers to cede control.

At October's unBoxed conference, Amazon unveiled Ads Agent and Full-Funnel Campaigns — tools where advertisers set objectives, products, creative and budgets, and 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, with no independent verification.

The FTC's allegations concern Sponsored Products auctions, not the new AI products. But they add weight to the broader concern: can advertisers inspect automated decisions, verify results and understand fees? Amazon Ads revenue is approaching $20 billion for the quarter, and the agentic push is central to its growth story.

The Google precedent

Google's ad tech antitrust case offers a partial template. A federal court found Google illegally monopolized publisher ad-serving and ad exchange markets; its search practices were separately found monopolistic. Remedies stopped short of divestiture but imposed measures meant to improve competition and interoperability.

The difference: Amazon is asking advertisers to give its technology greater control over buying decisions while regulators challenge the transparency of its existing auctions. Different businesses, different issues — same accountability problem.

ChatGPT ads: scale up, value down

Separate data on OpenAI's nascent ad offering suggests AI platforms aren't automatically better value either:

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

Buyers are responding by tightening measurement. Lindsay Marty, founder of Above the Bar Marketing, told Digiday: "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." She was speaking about advertisers reassessing Google Search budgets, but the logic applies to every opaque auction.

Expect the transparency question to sharpen as the FTC case proceeds and Amazon's automation tools move from beta to default — advertisers who can't audit the auction will at least want audit rights written into the deal.