Global Courant
The Federal Trade Commission has filed a long-awaited antitrust lawsuit Amazon.
In a sweeping complaint filed Tuesday in federal court in Seattle, the FTC and attorneys general from 17 states accused Amazon of exercising its “monopoly power” to inflate prices, degrade quality for shoppers and unlawfully exclude rivals, thereby undermining competition.
Shares of Amazon fell as much as 3% in afternoon trading.
The agency has laid out a two-pronged strategy through which Amazon “unlawfully maintains” its monopoly power. It pointed to so-called anti-discounting measures that the company uses to punish sellers and prevent other online retailers from offering lower, more competitive prices than Amazon, which translates into keeping prices higher for products on the Internet, according to the FTC.
Amazon also “effectively” requires sellers to use its “expensive” fulfillment services to obtain the vaunted Prime badge for their products, the FTC said, which in turn makes it more expensive to do business on the platform. Sellers will pay $1 of every $2 to Amazon, FTC Chair Lina Khan told reporters at a briefing on Tuesday.
The FTC and states alleged that Amazon forces sellers to pay expensive fulfillment and advertising fees to market their goods on the site, while leaving them with no choice “but to rely on Amazon to stay in business.” These tactics have worsened the shopping experience on Amazon by flooding search results with “pay-to-play ads” that send buyers to more expensive and less relevant products, Khan said.
Amazon CEO Andy Jassy speaks during the New York Times DealBook Summit in the Appel Room at Jazz At Lincoln Center on November 30, 2022 in New York City.
Michael M Santiago | Getty Images
“The upshot here is that Amazon is a monopolist and is exploiting its monopolies in a way that forces consumers and sellers to pay more for worse service,” Khan said during the briefing. “In a competitive world, a monopoly that jacks up prices and cuts service would create an opening for rivals and potential rivals to come in, attract business, grow and compete, but Amazon’s unlawful monopolistic strategy has eliminated that opportunity.” closed, and the public pays directly. as a result.”
David Zapolsky, Amazon’s general counsel and senior vice president of global public policy, said in a statement that the FTC’s complaint “is flawed on the facts and the law.”
“The practices the FTC is challenging have helped drive competition and innovation in the retail industry and have led to greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunities for the many businesses that sell on the Amazon storefront ” says Zapolsky. said. “If the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses – the opposite of what antitrust law is intended to do.”
The FTC did not describe possible solutions in its announcement, such as a breakup or divestitures, and said it primarily wants to hold Amazon liable. In the complaint, the FTC and states called on the court to prevent Amazon from continuing its alleged unlawful conduct and to order “structural relief” to the extent necessary to resolve the damages. Structural relief usually involves remedies such as separations and divestitures, which change the company itself, rather than simply ordering it to end a particular behavior.
Often in antitrust cases, a judge will first decide whether a company is liable for the alleged violations. Only at that point will a separate proceeding take place to determine the appropriate remedies should liability arise.
The lawsuit marks a major milestone for Khan, who rose to fame with her 2017 comment in the Yale Law Journal:Amazon’s antitrust paradoxKhan argued in the article that the prominent antitrust framework at the time failed to capture the true extent of Amazon’s dominance and the potential harm to competition. Through her work at the FTC, Khan has sought to reset that framework and push the boundaries of antitrust law. justice through risky legal battles.
Lina Khan, chairwoman of the Federal Trade Commission
Courtesy: FTC
Amazon sought Khan’s recusal of antitrust investigations into his activities, arguing that her past writings and criticisms showed she had pre-empted the outcome of such investigations.
The charges follow years of pressure on federal enforcers to crack down on what some competitors, vendors and lawmakers saw as anticompetitive practices. Amazon was one of four Big Tech companies investigated by the House Judiciary subcommittee on antitrust, which found it had monopolistic power over most of its third-party sellers and many suppliers. The majority of the Democratic staff at the time claimed that Amazon was strengthening “competitive positions” by acquiring rival sites like Diapers.com and Zappos.
At the time, an Amazon spokesperson said in a statement that “large companies are not necessarily dominant, and the assumption that success can only come from anticompetitive behavior is simply wrong.”
Founded by Jeff Bezos in Seattle in 1994, Amazon has transformed from an online bookseller into a retail, advertising and cloud computing giant with a staggering market value of about $1.4 trillion. The company has sought to expand its dominance by moving into sectors such as healthcare, streaming and groceries, acquiring primary care provider One Medical, legendary film and television studio MGM and luxury supermarket chain Whole Foods.
These steps have led to intensive scrutiny from regulators. The House of Representatives subcommittee report also accused Amazon of abusing its position in online retail to harm third-party sellers who rely on the platform to sell goods, claiming it uses “strong tactics” to bully retail partners. The FTC is also reviewing Amazon’s planned $1.7 billion acquisition of the Roomba maker I robot on antitrust grounds. Amazon recently paid about $30 million to settle two privacy lawsuits brought by the FTC regarding the Ring doorbell and Alexa units. The agency followed up with a lawsuit in June accusing Amazon of tricking users into signing up for Prime while making it too difficult for them to cancel.
Amazon’s marketplace has become a hub of its e-commerce business. At the time of the marketplace’s launch in 2000, Amazon had already grown beyond its roots as a bookseller to offer CDs and videos, among other products. But once it opened its doors to third-party sellers, it increased the number and variety of products for sale on its website, earning it the nickname “the everything store.”
The third-party marketplace has given Amazon access to a higher-margin business than just selling books. It has also increased the fees it charges sellers to do business on its site, display ads and use its fulfillment and delivery services. According to the nonprofit Institute for Local Self Reliance, the company took a 45% cut of every sale made by US sellers in the first half of 2023, up from 19% in 2014. Sales from third-party sellers now comprise 60% of the total number of units sold, the company said recently announced.
Read the full complaint here:
