Amazon isn’t getting sued because it’s too big, but because it isn’t playing fair according to the FTC and 17 states. The basis of the suit is that the company’s conduct blocks competition, enabling it to use monopoly power to inflate prices, degrade quality, overcharge sellers, and prevent rivals from fairly competing. Those are not trivial charges.
The complaint says Amazon engages in exclusionary conduct that prevents current competitors from growing and new competitors from emerging. Stifling competition on price, product selection, and quality, the company prevents rivals from attracting a critical mass of shoppers and sellers. Amazon is accused of far-reaching schemes that impact hundreds of billions of dollars in retail sales annually, touch hundreds of thousands of products sold by businesses big and small, and affect over a hundred million shoppers.
Amazon is said to be using 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.
Amazon’s anticompetitive conduct is said to occur in two markets—the online superstore market that serves shoppers and the online marketplace services purchased by sellers. Accusations include:
- Amazon uses anti-discounting measures to punish sellers and deter other online retailers from offering prices lower than Amazon. Should a seller offer lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they are effectively invisible.
- “Prime” eligibility is pushed onto sellers to use Amazon’s costly fulfillment service, making it more expensive for sellers on Amazon to also offer their products on other platforms. The coercion limits a competitor’s ability to compete against Amazon effectively.
Amazon is said to extract enormous monopoly rents from everyone within its reach, including:
- Replacing relevant, organic search results with paid advertisements—and increasing junk ads that worsen search quality, frustrate buyers that seek products, and sellers promised a return on their advertising purchase.
- Biasing 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. From a monthly fee sellers must pay for each item sold, to advertising fees necessary for sellers to do business. Many sellers pay close to 50% of their total revenues to Amazon, and buyers pay increased prices for thousands of products sold on or off Amazon.
The FTC seeks a permanent injunction in federal court prohibiting Amazon from engaging in its unlawful conduct and to stop Amazon’s monopolistic control to 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 Commission’s lawsuit. The Commission vote to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Western District of Washington was 3-0.
