Amazon says the new federal antitrust lawsuit filed against it shows the Federal Trade Commission (FTC) is “radically departing” from its role of protecting consumers.
On Tuesday, Sept. 26, 2023, a complaint filed by the FTC and 17 states in the U.S. District Court in Western Washington accuses Amazon of being a “monopolist” that uses anticompetitive and unfair strategies to stop rivals as well as third-party sellers on its platform from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against it.
In a detailed corporate blog post, David Zaplosky, Amazon senior VP of global public policy and general counsel, refuted the charges made in the federal complaint. Following are highlights from Zaplosky’s public response:
According to Zaplosky, when setting prices for its own products, Amazon tries to match other retailers’ low prices, both online and offline. Zaplosky said third-party sellers on its site set their prices independently, but Amazon invests in tools and education to help them offer competitive prices, similar to other retailers.
However, if a third-party seller still independently sets a non-competitive price, Zaplosky said Amazon doesn’t highlight or promote that offer.
“The FTC’s case alleges that our practice of only highlighting competitively priced offers and our practice of matching low prices offered by other retailers somehow lead to higher prices,” Zaplosky said in the blog post. “But that’s not how competition works. The FTC has it backwards and if they were successful in this lawsuit, the result would be anticompetitive and anti-consumer because we’d have to stop many of the things we do to offer and highlight low prices.”
Managed fulfillment and advertising for sellers
The FTC suit also alleges that Amazon engages in anti-competitive practices by requiring third-party sellers to use its hosted Fulfillment by Amazon (FBA) service handling product storage, packaging, shipping, returns, and customer service to be eligible for Prime sales.
In the blog post, Zaplosky said FBA is a best-in-class, “very” competitively priced service that is optional for sellers. He also cited Amazon’s managed advertising service, and disputed FTC claims that sellers are in any way forced to use the e-tailer’s fulfillment or advertising solutions, including in the case of obtaining Prime eligibility.
“The FTC’s allegation that we somehow force sellers to use our optional services is simply not true,” Zaplosky said in the post. “Sellers have choices, and many succeed in our store using other logistics services or choosing not to advertise with us. We also enable sellers to use the trusted Prime badge when other logistics services are able to meet our Prime customers’ high expectations for fast, reliable delivery.
Zaplosky also addressed what he termed the “gross mischaracterization” of the retail industry and its competitiveness by the FTC suit, pointing out that more than 80% of all products are purchased by consumers in stores.
“(A)s any shopper knows, you can buy the same products at any number of different retailers that compete vigorously with each other, including brick-and-mortar stores, online stores, and quickly growing hybrid models like buy-online-pick-up-in-store,” he said in the blog post.” This multitude of options gives customers the ready ability to shop around for the best deal. All of that competition leads to low margins for retailers, but lots of options for sellers to sell their products and better prices for customers wherever they choose to buy.”
FTC v. Amazon - a brief history
Under the direction of FTC chair Lina Khan, the agency has been placing Amazon and other major tech companies such as Microsoft, which recently successfully challenged an FTC attempt to block its acquisition of video game company Activison Blizzard, under increased scrutiny.
As far back as 2019, the FTC placed Amazon under increased scrutiny for alleged antitrust issues. U.S. Senator Elizabeth Warren (D-MA)publicly called for the federal government to break up the “monopolies” of Amazon, Google, and Facebook in March 2019. In addition to accusing these three companies of stifling competition by using their market power to pressure smaller companies into mergers, Warren called out their proprietary third-party marketplaces as unfairly limiting completion.
The FTC is also engaged in ongoing reviews of Amazon’s $3.9 billion acquisition of membership-based primary health care provider One Medical and its planned $1.4 billion purchase of robotic Roomba vaccum maker iRobot.