Amazon’s practices, this time — and perhaps incoming — have earned the ire of the US federal watchdog. In a monumental move, the Federal Trade Commission (FTC) has filed an antitrust lawsuit against e-commerce giant Amazon in a federal court in Seattle. The complaint accuses the e-commerce major of illegally stifling competition by abusing its dominance to inflate prices, lower product quality, and unfairly exclude Amazon’s rivals in the market.
The FTC, along with attorneys general from 17 US states, is alleging that Amazon has engaged in anticompetitive practices that harm consumers and sellers alike. The states in question are Connecticut, Wisconsin, Delaware, Michigan, Maine, Maryland, Massachusetts, Nevada, Minnesota, New Jersey, New York, New Hampshire, New Mexico, Oklahoma, Oregon, Pennsylvania, and Rhode Island. For now, the FTC and its state partners seeks to hold Amazon accountable for its alleged misconduct, as well as a permanent injunction in federal court to stop Amazon from continuing its conduct.
One of the key allegations in the complaint revolves around Amazon’s punitive measures against sellers who offer lower prices for their products outside of Amazon’s platform. Essentially, if Amazon detects that a seller is offering a lower price on another platform, it can push that seller further down in its search results, making them practically invisible to shoppers. This tactic effectively forces sellers to keep their prices higher on other platforms, resulting in higher prices for consumers across the internet.
The lawsuit also takes aim at Amazon’s requirement that sellers use its costly fulfillment services in order to qualify for the coveted “Prime” badge on their products. This requirement, according to the FTC, significantly increases the cost of doing business on Amazon. Sellers often end up paying Amazon substantial fees, with some estimates suggesting they pay nearly half of their total revenues to the platform. This coerces sellers into relying heavily on Amazon and restricts their ability to compete elsewhere. FTC Chair Lina Khan revealed that sellers are paying $1 of every $2 to Amazon.
“The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them,” Khan spoke on the matter. “Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”
The consequences of Amazon’s alleged anticompetitive practices are significant. According to the FTC, this ensures that consumers end up paying more for products, while Amazon’s dominance leads to the degradation of product quality and the proliferation of “pay to play ads” in search results, which steer shoppers towards more expensive and less relevant products. Finally, sellers are left with no choice but to rely on Amazon to conduct their business, as the platform’s requirements and fees make it challenging to compete elsewhere.
“The upshot here is that Amazon is a monopolist and it’s exploiting its monopolies in ways that leave shoppers and sellers paying more for worse service,” Khan spoke at the briefing on Tuesday. “In a competitive world, a monopoly hiking prices and degrading service would create an opening for rivals and potential rivals to come in, draw business, grow and compete, but Amazon’s unlawful monopolistic strategy has closed off that possibility, and the public is paying directly as a result.”
Coming to Amazon’s response on the matter, David Zapolsky, Amazon’s General Counsel and Senior Vice President of Global Public Policy, vehemently rejected the FTC’s allegations. In a statement, he stated that the practices under scrutiny have driven competition and innovation in the retail industry. He contended that if the FTC succeeds, it would lead to fewer product choices, higher prices, slower deliveries, and reduced options for small businesses—precisely the opposite of what the antitrust laws are intended to achieve.