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The Federal Trade Commission has accused Amazon of wielding monopolistic control over online markets used by shoppers and sellers in a groundbreaking lawsuit chaired by Lina Khan.
The case brought by the FTC and 17 state attorneys-general alleges that Amazon employed “a set of interlocking anti-competitive and unfair strategies” to maintain its monopoly power. These maneuvers are said to have hindered competitors and sellers from reducing prices, while allowing Amazon to lower quality for shoppers and overcharge sellers. Furthermore, they stifled innovation and competition, according to the FTC and state attorneys-general.
“Our complaint reveals how Amazon has employed punitive and coercive tactics to unlawfully preserve its monopolies,” stated Khan.
The lawsuit primarily focuses on two alleged schemes by Amazon. The first involves tactics aimed at discouraging sellers from offering lower prices on platforms other than Amazon. The regulator claims that Amazon made discounting sellers practically invisible on its search results.
Additionally, Amazon mandated that sellers use its expensive logistics network and delivery service, driving up their costs if they also wanted to offer products on other platforms. Failure to use this “fulfilment” service would result in the seller effectively disappearing from the Amazon storefront, as noted by Khan.
The FTC alleges that sellers had virtually no alternative but to pay a range of fees to Amazon, including for advertising, which amounted to nearly 50% of their total revenues. It is also alleged that Amazon manipulated search results to prioritize paid advertisements and its own products over others.
“Amazon is a monopolist that exploits its power to raise prices for American shoppers and impose exorbitant fees on hundreds of thousands of online sellers,” commented John Newman, deputy director of the FTC’s competition bureau. “Rarely in the history of US antitrust law has a single case had the potential to benefit so many people.”
Responding to the lawsuit, David Zapolsky, Amazon’s senior vice-president of global public policy and general counsel, stated, “The FTC’s lawsuit misrepresents the facts and the law, and we eagerly await the opportunity to present our case in court.”
The FTC aims to obtain an order to permanently halt Amazon from engaging in illegal conduct.
This lawsuit represents one of the most significant tests of Khan’s more assertive enforcement approach towards Big Tech. She believes that these companies have evaded regulatory scrutiny for years, enabling them to accumulate corporate power through anti-competitive behavior.
Prior to her appointment as FTC chair by President Joe Biden, Khan gained recognition for a 2017 academic paper in which she called for the breakup of Amazon
In June, the FTC separately sued Amazon for allegedly misleading customers into signing up for its Prime service without their consent. Amazon rejected the claims at the time, deeming them false.
In May, Amazon agreed to pay $25mn to settle a lawsuit brought by the FTC and the US Department of Justice, which accused the company of violating children’s privacy laws via its Alexa voice assistant.
Meanwhile, the UK’s competition watchdog is considering whether to accept a series of proposed changes to Amazon’s operations in the country, aimed at addressing the regulator’s concerns.
Amazon has requested Khan’s recusal from matters involving the company, citing her history of criticism. However, these efforts have been unsuccessful. When questioned about potential impartiality at a congressional hearing in 2021, Khan stated that she was not required to recuse herself under federal ethics rules.
Under the Biden administration, top antitrust officials such as Khan and Jonathan Kanter, head of the DoJ’s antitrust unit, have intensified enforcement efforts to curb corporate power in the US.
Kanter has sued Google for its dominance in digital advertising, and another DoJ case accusing the company of monopolizing internet search is currently in trial.
The FTC is currently working to compel Meta to unwind its acquisitions of Instagram and WhatsApp. It also attempted to block Meta’s acquisition of virtual reality business Within, but ultimately withdrew the challenge. The FTC is still fighting to prevent Microsoft’s acquisition of Activision, despite initial setbacks in court.
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