Amazon hit with antitrust lawsuit by FTC, 17 states

The Federal Trade Commission (FTC) and a bipartisan coalition of 17 state attorneys general sued Amazon over violations of anti-competitive behavior on Tuesday, building on the government’s crackdown on the market power of powerful tech companies. 

The lawsuit targeting Amazon is twofold — alleging the e-commerce giant’s practices are anti-competitive in how it serves shoppers as well as third-party sellers on the site, according to an FTC announcement. 

The government alleges that Amazon uses anti-competitive measures that punish sellers and deter other online retailers from offering lower prices than Amazon, which keeps prices higher for consumers across the internet even off Amazon’s platform. 

FTC Chairwoman Lina Khan called it a “one, two punch” that has “internet-wide effects” for consumers and sellers. 

“Amazon is a monopolist. It exploits its monopolies in ways that enrich Amazon but harm its customers: both the tens of millions of American households who regularly shop on Amazon’s online superstore and the hundreds of thousands of businesses who rely on Amazon to reach them,” the complaint states. 

The complaint, filed in the United States District Court for the Western District of Washington, does not lay out specific remedies the agency is seeking. Khan told reporters Tuesday at this stage the case is focused on seeking judgment from a court that establishes liability. 

In addition to its pricing policies, the FTC targets Amazon’s Prime subscription program by alleging that Amazon conditions sellers’ abilities to obtain “Prime” eligibility on sellers using Amazon’s fulfillment service. The government alleges that obligation is more expensive for sellers on Amazon to also offer their products on other platforms, which leads to limited competition against Amazon. 

The alleged anti-competitive practices lead to degraded customer service on Amazon, search results that preference Amazon’s products over rivals, and higher fees to sellers on Amazon, according to the FTC. 

Khan said the “cumulative impact” of Amazon’s conduct is “greater than any particular element.” She said it forms a “feedback loop” in a way that amplifies an overall exclusionary effect. 

Amazon’s senior vice president of global policy and general counsel David Zapolsky said in a statement that the lawsuit is “wrong on the facts and the law, and we look forward to making that case in court.”

“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,” he added. 

In a partially redacted 172-page complaint, the FTC alleges that Amazon implemented an algorithm “for the express purpose of deterring other online stores from offering lower prices.” 

Through Amazon’s tactics, the FTC alleges that sellers hike prices on alternative online markets “due to fear of Amazon’s penalties” or to “avoid punishment.” 

The complaint also alleges that Amazon limits sellers from being able to “multihome,” a term meaning sellers could offer their goods across multiple online sales channels. The FTC alleges Amazon limits this option by requiring sellers who want to be eligible for Prime to use Amazon’s fulfillment center. 

“Together, this self-reinforcing course of conduct blocks every important avenue of competition,” the complaint states. “With its monopoly power cemented, Amazon is now extracting monopoly profits without denting — and instead while growing —its monopoly power.”

The attorneys general of 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 FTC’s lawsuit. 

The lawsuit is the latest challenge from the FTC against Amazon. In May, the agency filed two lawsuits alleging Amazon violated user privacy, through its Ring security cameras and Alexa smart speakers. Amazon pushed back on the allegations but settled with the FTC for more than $30 million to settle the two charges. 

In June, the FTC filed a lawsuit alleging the e-commerce giant tricked users into enrolling in its Prime program and prevented them from canceling subscriptions Amazon pushed back on those allegations, as well. 

Updated at 1:49 pm.