Amazon is being sued by the Federal Trade Commission and 17 state attorney generals for “acting like a monopoly” and preventing businesses from emerging and succeeding.
The FTC says the delivery giant uses “a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”
The agency and a group of state attorney generals are accusing Amazon of preventing competitors from lowering prices, degrading the quality of products in the marketplace, overcharging customers, and powering down innovation.
The lawsuit says Amazon is big, but that’ is not the primary reason it is being accused of being a monopoly. Rather, the lawsuit says Amazon is preventing companies from advancing in the marketplace and new businesses from breaking through due to the company’s dominance.
“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said FTC Chair Lina Khan.
“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.”
“Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people,” said John Newman, deputy director of the FTC’s Bureau of Competition.
The FTC and the group of state attorney generals say they believe Amazon’s anti-competitive behavior is two-tiered: the online store for shoppers and online services provided to sellers.
Among the tactics the FTC accuses Amazon of using are: anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon’s and conditioning sellers’ ability to obtain Prime eligibility for their products. Amazon’s Prime service, according to the FTC, has made it costly for sellers on Amazon to also offer their products on other platforms.
The FTC further accuses Amazon of doing the following:
- Degrading the customer experience by replacing relevant, organic search results with paid advertisements—and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase
- 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. These fees range from a monthly fee sellers must pay for each item sold to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon
The FTC and state attorney generals are asking for a permanent injunction in federal court that would prohibit Amazon from its monopoly tactics.
A spokesperson for Amazon did not respond to a request for comment in time for publication of this story.