FTC Investigation: Google & Amazon Advertising Practices

Executive Summary

The FTC has opened investigations into Google and Amazon for allegedly misleading advertisers about pricing transparency and targeting effectiveness. This affects billions in annual ad spend and represents systematic issues with performance discrepancies.

Financial Impact Scale

• Google: $280B+ annual ad revenue
• Amazon: $47B+ annual ad revenue
• Estimated losses: Potentially billions if 10% of revenue derived from deceptive practices
• Advertiser impact: Most see negative ROI on first $10K spent

Specific Practices Under Investigation

Amazon Reserve Pricing Disclosure

• Issue: Minimum bid thresholds not disclosed to advertisers
• Real-world example: Advertisers bid $2 on keywords requiring $8 minimum
• Consequence: Amazon takes payment while showing ads to zero users
• Detection method: Ads receive no impressions despite active campaigns

Google Cost Escalation Without Disclosure

• Pattern: 2-3 months decent performance, then mysterious cost increases
• Official explanation: "Market competition increased"
• Reality: Algorithm changes increase costs without advertiser notification
• Performance impact: Costs rise while conversion rates decline

Operational Intelligence for Advertisers

Documentation Requirements

Critical for potential restitution claims:

• Screenshot bid recommendations before campaign launch
• Save performance projections from platform tools
• Document cost increases without explanation
• Track promised vs. actual results with timestamps

Performance Discrepancy Patterns

Expected vs. Reality:

• Platform projections: 100% of promised results
• Actual performance: ~20% of projected outcomes
• Timeline: Degradation typically begins months 3-4

Risk Assessment

Continue advertising but with enhanced tracking:

• Investigation timeline: 6-12 months initial findings
• Settlement negotiations: Additional 6-12 months if violations found
• Faster resolution than multi-year antitrust cases

Technical Implementation Guidance

Monitoring Requirements

Essential tracking for evidence:

• Bid threshold testing across keyword categories
• Performance baseline establishment in first 90 days
• Cost-per-acquisition trend analysis
• Impression delivery verification

Warning Indicators

Red flags for deceptive practices:

• Ads receiving zero impressions despite "approved" status
• CPC increases >20% without notification
• Performance metrics declining while spend increases
• Platform recommendations consistently requiring higher bids

Legal Context and Timing

Related Cases

• Google antitrust trial: Ad tech monopoly (September 22nd start)
• Amazon antitrust trial: Prime enrollment practices (September 22nd start)
• Consumer protection: Faster resolution than antitrust cases

Investigation Scope

FTC Consumer Protection Unit focus:

• Direct harm to businesses and consumers
• Settlement agreements with specific disclosure requirements
• Not typical "pay fine, change nothing" approach

Decision Criteria for Advertisers

Continue Advertising If:

• Can implement enhanced tracking systems
• Have resources for documentation requirements
• Performance still profitable despite discrepancies

Pause Advertising If:

• Cannot track performance deviations
• Lack resources for potential legal documentation
• Current campaigns showing consistent negative ROI

Resource Requirements

Documentation Effort

• Time investment: 30-60 minutes per campaign setup for evidence collection
• Tools needed: Screenshot capability, performance tracking spreadsheets
• Expertise required: Basic understanding of advertising metrics

Financial Tracking

• Minimum tracking period: 12 months historical data
• Key metrics: CPC trends, impression delivery rates, conversion tracking
• Budget allocation: Consider 10-20% performance buffer for investigation period

Critical Warnings

What Official Documentation Won't Tell You

• Minimum bid requirements often 2-4x displayed estimates
• Algorithm changes occur without advertiser notification
• Performance degradation is systematic, not market-driven
• "Optimization" recommendations typically increase platform revenue

Breaking Points

• Small business budgets: $10K threshold for negative ROI becomes critical
• Enterprise accounts: Performance degradation accelerates after $50K spend
• Campaign longevity: Effectiveness drops significantly after 90 days without intervention

Expected Outcomes

If Violations Found

• Disclosure requirements: Mandatory upfront pricing transparency
• Algorithmic changes: Advance notification requirements
• Restitution potential: Based on documented performance gaps
• Industry impact: Standardized pricing disclosure across platforms

Implementation Timeline

• Q4 2025: Initial findings expected
• Q2 2026: Settlement negotiations if violations confirmed
• Q3 2026: New disclosure requirements implementation

This investigation represents the first systematic examination of advertising pricing transparency by federal regulators, with implications for billions in annual ad spend across industries.