FTC lawsuit accuses Amazon of wielding monopoly power over online retail

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The Federal Trade Commission has accused Amazon of wielding monopolistic control over online markets used by shoppers and sellers in a landmark lawsuit for chair Lina Khan.

The case brought by the FTC and 17 state attorneys-general said Amazon used “a set of interlocking anti-competitive and unfair strategies” to maintain monopoly power. Its manoeuvres allegedly stopped competitors and sellers from lowering prices and allowed Amazon to reduce quality for shoppers and overcharge sellers while quashing innovation and competition, they said.

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” Khan said in a statement.

The lawsuit focuses on two alleged Amazon schemes. The first involves strategies to deter sellers from offering lower prices on platforms other than Amazon. Amazon could make discounting sellers “effectively invisible” on its search results, the regulator said.

Amazon also required sellers to use its “costly” logistics network and delivery service, making it more expensive for them to also offer their products on other platforms, the FTC alleged. A failure to use this “fulfilment” service would result in a seller “effectively” disappearing from the Amazon storefront, Khan said.

The FTC said sellers had virtually no choice but to pay a string of fees to Amazon — including for advertising — that added up to nearly 50 per cent of those merchants’ total revenues. The company also allegedly gamed its search results to favour paid advertisements and its own products at the expense of other items.

“Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, deputy director of the FTC’s competition bureau. “Seldom in the history of US antitrust law has one case had the potential to do so much good for so many people.”

David Zapolsky, Amazon’s senior vice-president of global public policy and general counsel, said the lawsuit “makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition.”

“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,” he said.

The regulator is seeking an order to permanently stop Amazon from engaging in illegal conduct.

The lawsuit is one of the biggest tests yet of Khan’s more aggressive enforcement stance towards Big Tech, which she believes has skirted regulatory scrutiny for decades, allowing groups to amass corporate power via anti-competitive conduct.

Before being appointed as FTC chair by President Joe Biden, Khan rose to prominence with a 2017 academic paper calling for the break-up of Amazon.

Amazon’s strategy of “choosing to price below-cost and expand widely” had allowed it to “evade government scrutiny” and be at “the centre of ecommerce and [the company] now serves as essential infrastructure for a host of other businesses that depend upon it”, she wrote at the time. 

The FTC in June separately sued Amazon for allegedly tricking customers into signing up for its Prime service without their consent. Amazon at the time called the claims “false on the facts and the law”.

In May, Amazon agreed to pay $25mn to settle a lawsuit brought by the FTC and the US Department of Justice charging it with violating children’s privacy laws via its Alexa voice assistant.

The case comes as the UK’s competition watchdog considers whether to accept a series of changes to how Amazon operates in the country, which were proposed by the company to quell the regulator’s concerns.

Amazon has requested Khan be recused from matters involving the company, citing her longstanding criticism, but its efforts have not succeeded. When asked about potential impartiality at a congressional hearing in 2021, Khan said she was not required to recuse under federal ethics rules.

Under the Biden administration, top antitrust officials including Khan and Jonathan Kanter, head of the DoJ’s antitrust unit, have stepped up enforcement efforts in a bid to crack down on corporate power in the US.

Kanter has sued Google for dominance in digital advertising, and a trial is ongoing in another DoJ case accusing the company of monopolising internet search.

The FTC is fighting to force Meta to unwind its acquisitions of Instagram and WhatsApp. It also sought to block Meta’s acquisition of virtual reality business Within, but ultimately withdrew the challenge. The FTC is still trying to block Microsoft’s acquisition of Activision after facing initial losses in court.