An antitrust lawsuit has been filed against Amazon over claims it overcharges sellers and holds back the competition.
The lawsuit was filed in a Seattle federal court on Tuesday by the FTC and attorneys general from 17 states, accusing Amazon of wielding its “monopoly power” to inflate prices, degrade quality for shoppers, and unlawfully exclude rivals, thereby undermining competition, CNBC News reported.
The agency detailed what they say is Amazon’s two-pronged strategy that helps it “unlawfully maintain” its monopoly power. The FTC said the suit also cited the company’s so-called anti-discounting measures to punish sellers and deter other online retailers from offering lower, more competitive prices than Amazon, which translates to keeping costs higher for products across the internet.
Amazon also “effectively requires” sellers to use its “costly” fulfillment services to obtain the vaunted Prime badge for their products, the FTC wrote, making it more expensive to do business on the platform.
FTC Chair Lina Khan told media outlets during a briefing Tuesday that sellers are paying $1 of every $2 to Amazon.
Plaintiffs accuse Amazon of forcing sellers to pay expensive fulfillment and advertising fees to market their goods on its site while facing no other choice “but to rely on Amazon to stay in business.” These tactics, in return, degrade the shopping experience on the site by having an overwhelming search result with “pay to play ads” that steer shoppers toward more expensive and less relevant products, Khan said.
“The upshot here is that Amazon is a monopolist, and it’s exploiting its monopolies in ways that leave shoppers and sellers paying more for worse service,” Khan said at the briefing. “In a competitive world, a monopoly hiking prices and degrading service would create an opening for rivals and potential rivals to come in, draw business, grow, and compete, but Amazon’s unlawful monopolistic strategy has closed off that possibility, and the public is paying directly as a result.”
David Zapolsky, Amazon’s general counsel and senior vice president of global public policy, responded to the FTC’s complaint, saying it is “wrong on the facts and the law.”
“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,” 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 FTC says it is primarily seeking to hold Amazon liable. In the complaint, the FTC and states called for the court to prevent Amazon from continuing the alleged unlawful behavior and order “structural relief” to the extent necessary to resolve the harm.
Structural relief refers to remedies, like breakups and divestments, that change the business itself rather than order it to discontinue a specific behavior.
Often, in antitrust cases, a judge will rule on whether a company is liable for the alleged violations first. From there, a separate proceeding to determine the proper remedies occurs should there be a finding of liability.