The Federal Trade Commission and 17 state attorneys general filed suit against Amazon.com on Tuesday, alleging the e-commerce giant used its monopoly power to “inflate prices, degrade quality and stifle innovation for consumers and businesses.”
The 172-page complaint, filed in the U.S. District Court for the Western District of Washington, alleges Amazon (NASDAQ: AMZN) engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging.”
The FTC lawsuit, which follows a four-year investigation into the Seattle-based company, states that it’s not the size of Amazon that violates the law, but the the company’s alleged “anticompetitive conduct” — which includes its “online superstore market that serves shoppers and the market for online marketplace services purchased by sellers.”
“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” FTC Chair Lina M. Khan said in a statement on Tuesday.
“The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them.”
In the suit, the FTC alleges Amazon has harmed its competition by requiring sellers who want their products to be Prime-eligible to use its logistics platform, Fulfillment by Amazon, which it claims makes it substantially more expensive for sellers on Amazon to also offer their products on other platforms.
Another issue outlined in the FTC suit alleges that Amazon engages in anti-discounting conduct, which “algorithmically punishes sellers” if Amazon discovers they are offering lower-priced goods elsewhere.
“Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible,” the FTC said.
Amazon responds to FTC suit
In a statement, Amazon denied the allegations outlined in the FTC’s lawsuit.
“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” David Zapolsky, Amazon’s senior vice president of global public policy and general counsel, said in a statement. “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.”
In his statement, Zapolsky said: “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.”
The company has about 500,000 independent businesses selling goods on its platform in the U.S., which have created 1.5 million jobs, Zapolsky said.
He said that since Amazon opened its business model nearly 20 years ago to include third-party sellers, more than 60% of the company’s sales are from independent sellers, consisting mostly of small and medium-size businesses.
“The FTC’s allegation that we somehow force sellers to use our optional services is simply not true,” Zapolsky said. “Sellers have choices and many succeed in our store using other logistics services or choosing not to advertise with us.”
The states included in the lawsuit are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island and Wisconsin.
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Michelle Minsky
Amazon is ruining our brick-and-mortar options. If nothing is done about the growth of Amazon, we will not have options for shopping in the future. It is sad that the days of running out to get something that you need last minute are slowly going to the waste side.
Zac Corbett
As an SME involved in importing and distributing goods to retailers, Amazon became a necessary evil. Our manufacturing partners insisted that we have a presence on the platform, but the margins quickly disappeared (especially in when trying to participate in Prime through the FBA). If you actually manage to find some success, Amazon swoops in with their private branding to undercut the category. I guarantee that no North American businesses are succeeding in the face of Chinese companies shipping directly to the North American FBA warehouses. Too many of these companies are able to reduce their production costs at the expense of lax morals and ethics with regard to workers rights. If we don’t allow these practices in North America, why do we let these companies profit from our hard-earned dollars?
Yes, Amazon may be allowing a lower price point to exist in our North American marketplace, but at what cost?