FTC files lawsuit against Amazon with 17 states

A long-awaited federal antitrust lawsuit against Amazon is officially moving forward.

A complaint filed by the Federal Trade Commission (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 and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against it.  

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said FTC Chair Lina M. Khan in an official statement. “Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”

In the 172-page suit, the federal government accused Amazon of protecting a monopoly over a "huge swath" of the online economy by squeezing merchants and favoring its own services.

"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 the statement. “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”

David Zaplosky, Amazon senior VP of global public policy and general counsel, responded to the suit in comments emailed to Chain Store Age.

“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” Zaplosky said. “The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store. 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 designed to do. The lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court.”

Specific allegations made by the federal suit include:

• Non-competitive anti-discounting measure. For example, the FTC alleges that if Amazon discovers that a seller is offering lower-priced goods elsewhere, it can place the seller so far down in its search results that they become “effectively invisible.”
• Requiring sellers to use Amazon’s managed fulfillment service to obtain “Prime” eligibility for their products—which the FTC says is a virtual necessity for doing business on Amazon— allegedly making it substantially more expensive for sellers on Amazon to also offer their products on other platforms.
• Replacing relevant, organic search results with paid advertisements and deliberately increasing “junk ads” that worsen search quality.

• Biasing Amazon’s search results to preference Amazon’s own products. 
• Charging fees on sellers that combined can force them to pay close to 50% of their total revenues to Amazon, decreasing their profits and increasing prices for consumers.

The FTC and its state partners are seeking a permanent injunction in federal court that they say would prohibit Amazon from engaging in illegal conduct and help restore competition.

Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin joined the FTC lawsuit. The FTC vote to authorize staff to file for a permanent injunction in the U.S. District Court for the Western District of Washington was 3-0.

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.