US FTC hits Amazon with antitrust lawsuit on e-commerce business

The US Federal Trade Commission (FTC) has filed a lawsuit against Amazon, alleging that the company has been engaging in a number of “interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”

In the complaint, the FTC and 17 state attorneys general claim that Amazon’s actions have prevented its rivals and sellers from lowering prices, leading to a decrease in quality for shoppers, sellers being overcharged, innovation being stifled, and Amazon’s market competitors prevented from fairly competing against the company.

Amazon hasn’t violated the law because of its size but rather because its exclusionary conduct prevents current competitors from growing and new ones from emerging, the FTC alleges. It claims Amazon’s anticompetitive conduct has occurred in both its online shopping market that serves buyers, and its online marketplace that serves sellers.

“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, deputy director of the FTC’s bureau of competition, in a statement.

A core issue of the lawsuit is Amazon’s practice of steadily increasing fulfillment fees for sellers on the tech giant’s e-commerce platform, which the FTC says forces them to raise prices for customers. The FTC also notes that the company effectively punishes sellers that offer products for sale on other platforms at prices that are lower those on Amazon, and that punishment can include removal from the Amazon site.

After the FTC filed the lawsuit, Amazon’s senior vice president, global public policy and general counsel, David Zapolsky, posted an update on X, the social media platform formerly known as Twitter, stating that Amazon believes the FTC’s lawsuit is “misguided.”

“Unfortunately, it appears the current FTC is radically departing from that approach, filing a misguided lawsuit against Amazon that would, if successful, force Amazon to engage in practices that actually harm consumers and the many businesses that sell in our store,” the company wrote in a statement, going on to rebut the allegations laid out by the regulator.

“We fundamentally disagree with the FTC’s allegations… We will contest this lawsuit,” the statement said.

Although the FTC did not explicitly say that it would seek to break up Amazon, it did include a request for “structural relief,” noted David Olson, associate professor at Boston College Law School. If the FTC prevails, it could mean “the court would order some change in the structure of Amazon, such as not running Amazon Marketplace and also competing there, or spinning off its fulfilment operation into a separate, unrelated business,” Olson said.

Amazon is also facing an anticompetition probe in the UK after the Competition and Markets Authority (CMA) announced in July 2022 it was launching an investigation into Amazon’s UK Marketplace platform.

The investigation is focused on three competitive areas: The way that non-public third-party seller data may be used within Amazon’s retail business; how Amazon sets criteria selecting which product offer is placed within the “Buy Box,” and which sellers can list products under Amazon’s Prime brand on its Marketplace in the UK.

As of now, no outcome has been published and the CMA is currently considering the comments received in response to the consultation on commitments put forward by Amazon.

Big tech faces antitrust probes by a number of global regulators

Big tech companies are facing antitrust investigations across a number of jurisdictions, most notably the in the US and the EU.

Google is currently defending itself against the first of two major lawsuits brought forward by the US government. In these cases, the government alleges that it illegally used its dominance in search  to quash competition, to the detriment of the public at large.

The search engine giant also recently filed an appeal against a $2.6 billion fine imposed by the European Union in 2017 after it found the company had violated antitrust rules by using its dominant position in the search engine market to illegally promote its comparison shopping service.

That case was the first of three antitrust complaints levelled against Google by the EU Commission in the past decade. The other cases for which Google was found to be in breach of EU regulations were related to its Android mobile operating system — in which Google lost an appeal last year — and its AdSense advertising service.

As a result of the AdSense case, the EU Commission issued a threat earlier this year that they would try to break up Google if the company did not attempt to regulate its behavior. Under the terms of its recently enforced Digital Markets Act, the EU also retains the ability to oblige a companies that fall under the scope of its regulatory powers to sell parts of a business if it deems systematic infringements have occurred.

(This update includes addiitonal information about lawsuit details and additional reporting by Jon Gold on possible antitrust structural remedies.)

Copyright © 2023 IDG Communications, Inc.


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