The Federal Trade Commission (FTC) and 17 states have taken legal action against Amazon, initiating a highly anticipated antitrust battle with the e-commerce giant that could reshape the way Americans make online purchases, from toilet paper to electronics.
In a comprehensive 172-page lawsuit, the federal government’s most significant challenge to the dominance of the online marketplace, Amazon stands accused of maintaining a monopoly over substantial portions of online retail by pressuring merchants and promoting its proprietary services.
The lawsuit alleges that Amazon’s actions resulted in “artificially inflated prices” for consumers, as merchants were prevented from offering lower prices on alternative platforms. Additionally, it led to a suboptimal shopping experience for customers, with Amazon prioritizing its products and inundating search results with advertisements, making it exceedingly difficult for competitors to thrive.
The suit, filed in the U.S. District Court for the Western District of Washington, stated, “A single company, Amazon, has gained control over a substantial portion of the online retail market. It exploits its monopolies in ways that benefit Amazon while harming both the millions of American households that frequently shop on Amazon’s online superstore and the hundreds of thousands of businesses that rely on Amazon for their reach.”
This legal action thrusts Amazon, a colossal entity with a market capitalization of $1.3 trillion, into the spotlight, marking the culmination of years of growing scrutiny. From its humble origins as an online bookseller founded by Jeff Bezos in 1994, Amazon has evolved into a conglomerate spanning retail, entertainment, and the foundational infrastructure of the internet.
Amazon’s influence has been particularly profound through its expansive online marketplace, often referred to as the “everything store” for its vast product range and speedy delivery services. The company’s dominance in online commerce has left a profound impact on merchants worldwide, defined the labor conditions for over a million warehouse employees, and even influenced the U.S. Postal Service to deliver on Sundays.
Amazon now finds itself in the same league as other tech giants facing government scrutiny over monopoly concerns, such as Google, which is in the midst of an antitrust trial, and Meta (formerly Facebook), which is also facing an antitrust lawsuit from the FTC. In response, Congress has explored legislative measures to regulate the common business practices of these tech behemoths.
This latest lawsuit places Amazon in direct opposition to Lina Khan, the FTC’s chair, who has long advocated for stronger antitrust measures against tech companies. Khan rose to prominence with a 2017 paper arguing that existing antitrust laws inadequately prevented Amazon from consolidating power over customers, competitors, and suppliers, sparking a debate about the need to modernize antitrust laws in the face of tech giants.
Amazon’s general counsel, David Zapolsky, vehemently refuted the FTC’s allegations, asserting that they were factually and legally incorrect. He contended that the lawsuit deviated from the FTC’s mission of protecting consumers and competition, warning that its success could result in fewer product choices, higher prices, slower deliveries, and diminished options for small businesses.
The FTC has sought a court injunction to halt Amazon’s “unlawful conduct” and has hinted at the possibility of restructuring the company, although the specifics of how Amazon’s dominance could be curtailed were not detailed in the lawsuit. Further details may emerge if the FTC can substantiate its claims of Amazon’s legal violations.
FTC Chair Lina Khan expressed optimism about the lawsuit’s potential to restore competition, lower prices, and improve product quality and selection for consumers.
The lawsuit focuses on Amazon’s alleged misuse of the “Buy Box,” a crucial feature on its website and app that encourages customers to make purchases. When Amazon identifies a product available for a lower price elsewhere, it allegedly replaces the “Buy Now” or “Add to Cart” buttons with less enticing language and designs, discouraging customers from seeking discounts on external sites. The lawsuit argues that merchants faced declining sales if they lost access to the Buy Box, thereby keeping prices elevated on alternative platforms.
The lawsuit also contends that Amazon hindered merchants from selling on multiple platforms by mandating the use of Amazon’s fulfillment and delivery services to qualify for Prime benefits, a program boasting millions of subscribers.
Despite mounting scrutiny, Amazon has continued to expand its operations, completing acquisitions such as One Medical, a chain of primary care practices; iRobot, the manufacturer of Roomba; and Metro-Goldwyn Mayer, a legendary movie studio, strengthening its position in the entertainment industry.
The FTC’s investigation into Amazon’s business practices began in the summer of 2019, amid an array of complaints from critics and competitors. Following President Biden’s appointment of Lina Khan as FTC chair in June 2021, Amazon cooperated by providing documents and information to the agency. Under Khan’s leadership, a new team was assembled to lead the antitrust investigation.
Tensions between Amazon and the FTC escalated when Khan assumed office. Shortly thereafter, Amazon requested her recusal from all antitrust matters concerning the company. Last year, Amazon also sought to prevent the FTC from interviewing Jeff Bezos and Andy Jassy, the company’s CEO, as part of a separate investigation into its Prime membership practices. The FTC responded by suing Amazon in June for allegedly violating consumer protection laws related to Prime memberships.
This latest lawsuit aligns the FTC with regulatory bodies worldwide that are working to curb Amazon’s economic influence. In 2021, the District of Columbia’s attorney general accused Amazon of price control, although the case was dismissed in 2022. California, however, pursued a more robust case against Amazon, which survived Amazon’s attempts to have it dismissed.
The FTC’s lawsuit echoes previous allegations from European Union regulators, which led Amazon to implement changes in some of its practices. Last year, Amazon agreed to a European settlement that would display offers from multiple merchants on individual product pages and removed contractual restrictions preventing merchants from offering discounts on other platforms.
Additionally, Amazon is reportedly scaling back its private label brands after they failed to gain significant consumer traction. In June, the company announced plans to reopen enrollment for a program allowing merchants to sell Prime-eligible products while handling their own deliveries, bypassing Amazon’s warehouses.