The Federal Trade Commission (FTC) announced Tuesday that it has taken legal action — alongside a number of state attorneys general, including Maine’s — against online retail giant Amazon for allegedly utilizing illegal means to maintain monopoly power over the e-commerce industry.
According to their press release, the FTC is accusing Amazon of using “a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”
The lawsuit argues that Amazon’s tactics allow it to “stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.”
“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 the press release.
Khan further stated that the complaint alleges Amazon is “exploiting its monopoly power to enrich itself while raising prices and degrading service.”
“Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition,” Khan said.
John Newman, Deputy Director of the FTC’s Bureau of Competition was also quoted in the press release: “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.”
“Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people,” Newman said.
The FTC accuses Amazon of engaging in illegal monopolistic behaviors that impact both consumers and sellers that utilize the platform.
Among the activities noted specifically in the lawsuit are:
- “Replacing relevant, organic search results with paid advertisements”
- “Deliberately increasing junk ads that worsen search quality”
- “Biasing Amazon’s search results to preference Amazon’s own products over ones that Amazon knows are of better quality”
- “Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business”
The complaint provides extensive information regarding these and other alleged monopolistic practices, including offering Amazon Prime subscriptions to consumers and a “Buy With Prime” program for sellers.
Many relevant details and statistics, however, have been redacted from the copy of the document made publicly available by the FTC.
The FTC and its state partners — including Maine — are seeking a “permanent injunction” against Amazon that would prohibit the company “from engaging in its unlawful conduct and pry loose Amazon’s monopolistic control to restore competition.”
Amazon responded to the lawsuit with a press release of its own — authored by David Zapolsky, Senior Vice President of Amazon’s Global Public Policy & General Counsel.
“We respect the role the FTC has historically played in protecting consumers and promoting competition,” the statement said.
“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—such as having to feature higher prices, offer slower or less reliable Prime shipping, and make Prime more expensive and less convenient,” Zapolsky wrote.
“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,” Amazon wrote. “But that’s not how competition works.”
Zapolsky argued that should the FTC prevail, “the result would be anticompetitive and anti-consumer” because Amazon would be forced “to stop many of the things we do to offer and highlight low prices—a perverse result that would be directly opposed to the goals of antitrust law.”
Amazon also maintains that its unique services offered to sellers on the platform, and Fulfillment by Amazon in particular, remain entirely optional — making the FTC’s claims about their business practices “untrue.”
The company also responded to the allegations made surrounding their offering of Amazon Prime subscriptions to consumers and participation in a “Buy With Prime” program for sellers, arguing that it is an example of “innovation,” not “anticompetitive.”
“We fundamentally disagree with the FTC’s allegations—which are in many cases wrong or misleading—and with their overreaching and misguided approach to antitrust, which would harm consumers, hurt independent businesses, and upend long-standing and well-considered doctrines,” Zapolsky wrote.
[PRIMARY SOURCE: Read Amazon’s Full Press Release]
According to the Wall Street Journal, Amazon sales accounted for less than one-third of total e-commerce sales in the U.S. over the last four quarters. The online retail giant has also been facing stiffer competition in recent months.
For example, Walmart’s share of e-commerce sales has averaged 39% annual growth over the course of the past four years. Shopify — another e-commerce platform — has tripled its revenue during the past three years.
Colin Sebastian of Robert W. Baird was quoted in the Wall Street Journal as indicating that the scope of the FTC’s case is narrower than expected, as it does not appear to be seeking a breakup of the corporation.
“At best, the FTC could hope for some modest changes to Amazon’s pricing policies, fewer requirements around Prime shipping, and presumably improved search results,” Sebastian wrote.
Google — another tech industry giant — has also found itself currently at the center of a legal battle with the federal government.
The U.S. Justice Department filed a lawsuit against the company for allegedly violating anti-trust law by establishing “illegal agreements” intended “to sideline its rivals” such that consumers and advertisers were harmed in the process.
One example of this behavior was Google’s billion-dollar agreement to serve as the default search engine on the Safari web browser, the browser that comes pre-installed in Apple iPhones.
The company also has agreements with Android-based devices that “forbid pre-installing or promoting rival search engines if they opt to take a cut of Google’s search revenue.”
Google, on the other hand, has defended its business strategy. According to the company, its deals actually promote competition by “supplying browser providers with what they want: a single default search option for customers.”
It is not yet clear when the FTC’s complaint against Amazon will wind its way into a courtroom, nor how long it will take for the legal battle to ultimately resolve once it does.