The U.S. is waging an antitrust battle against Amazon -- one that’s not a clear-cut victory for the federal enforcement agency.
The Federal Trade Commission and 17 states allege that Amazon used unfair and anticompetitive strategies to stop rival companies and sellers on its popular retail platform from lowering prices and stifle innovation. The lawsuit also claims that Amazon’s actions hurt shoppers by muddying searches with paid ads and favoring its own products.
The FTC’s lawsuit against Amazon has been long-anticipated. FTC Chair Lina Khan wrote extensively on Amazon’s monopoly power before joining the federal enforcement agency. In a paper titled “Amazon’s Antitrust Paradox,” published in the Yale Law Journal in 2017, Khan said elements of Amazon’s business pose anticompetitive concerns, but it has “escaped antitrust scrutiny.”
The core issue the FTC raises is that Amazon makes it difficult for other retail platforms to gain a foothold in the market, said George Hay, an antitrust law professor at the Cornell University School of Law. If a seller wants to be on Amazon, it limits their ability to give a good deal to other platforms. That makes it hard for other platforms to compete.
“They’ve done their investigation. They think they can make a case,” Hay said. “I don’t think it’s going to be an easy case.”
The FTC faces some of the same issues federal enforcers are facing in the Google antitrust case -- namely that big tech companies hire bevies of antitrust lawyers and are well-prepared for any lawsuits they might face, Hay said.
“It would be foolish to presume that this is anything like an open-and-shut case,” Hay said. “Everything Amazon has done is basically done in the public eye. Everything they’ve done has been vetted by their antitrust lawyers. It means they’ve been careful in what they’ve done. And I’m sure they think they have pretty good arguments that they can make when this goes to trial.”
The FTC’s case in its antitrust lawsuit case against Amazon
According to the FTC, by hurting competition on product selection, quality and price as well as engaging in conduct to prevent rivals from attracting both sellers and shoppers, “Amazon ensures that no current or future rival can threaten its dominance.”
“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,” Khan wrote in a news release.
The antitrust lawsuit against Amazon focuses on two markets: the market serving shoppers and the market for online services purchased by sellers.
George HayAntitrust law professor, Cornell University School of Law
The FTC alleges Amazon’s anticompetitive conduct includes anti-discounting measures, which punish other sellers on Amazon’s online retail platform for selling their products at a lower price elsewhere than Amazon. The FTC claims that if Amazon finds a seller offering lower prices on a different platform, then Amazon “can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.”
Amazon’s other alleged anticompetitive tactics harming the shopper experience includes degrading the customer experience by replacing organic search results with paid advertisements as well as deliberately increasing junk advertisements that worsen search quality and biasing Amazon’s search results to favor Amazon products.
Sumit Sharma, senior researcher of tech competition at the nonprofit Consumer Reports, applauded the FTC’s antitrust lawsuit against Amazon.
“The unchecked power of Amazon has often resulted in higher prices and fewer choices for consumers,” Sharma said in a statement. “Amazon directly competes with sellers on its platforms, so it’s incentivized to set terms and conditions that increase its profits to the detriment of consumers and sellers.”
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.