The Federal Trade Commission and 17 state attorneys general on Tuesday sued Amazon, claiming the online giant has abused its power and position as a retail platform to maintain an illegal monopoly.
The lawsuit alleges that Amazon has used its popular platform to box out retailers that need to operate on the site to reach a wide audience. The FTC and attorneys general say Amazon’s actions “stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.”
In response, Amazon said the lawsuit is “wrong on the facts and the law,” and will hurt consumers.
“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” said David Zapolsky, senior vice president and general counsel for Amazon. “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.
“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. 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.”
The ramification of this suit are potentially massive, with one result leading to the breakup of Amazon, which has expanded beyond its retail site and is dominant as a Hollywood production studio and streaming business, web services provider and the owner of Whole Foods and Amazon-branded supermarkets. But this only marks the beginning of what could be a years-long protracted battle filled with appeals and legal machinations.
It’s also the culmination of a years-long investigation into Amazon and is just the latest action taken by the government against Big Tech. The Justice Department is already engaged in an antitrust legal battle against Google that’s going through trial now. The FTC was widely expected to take legal action, and had sued Amazon earlier on a smaller issue of misleading consumers on Prime subscription signups, and making it difficult to cancel.
It alleges that Amazon is using its power to punish retailers on its platform that offer prices that undercut Amazon, moving some products lower in search results. In addition, the suit says the company essentially forces retailers to obtain “Prime” eligibility on its site — which it says is a “virtual necessity for doing business on Amazon” — which also means using the tech company’s costly fulfillment service.
It also claims that Amazon degrades the customer experience by replacing relevant, organic search results with paid advertisements, which frustrate consumers.
The AGs 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 in it lawsuit.
Amazon had a chance to head off the lawsuit during a so-called “last-rites” meeting with the agency on August 15, but reportedly failed to offer any specific concessions, according to The Wall Street Journal.
This is a marquee case for FTC Chairwoman Lina Khan, whose profile rose after a 2017 Yale Law Journal article that argued that Amazon wielded too much power. It’s unclear whether Amazon could’ve offered any concessions to satisfy the company, as a lawsuit against the tech giant was widely anticipated.
The FTC and state AGs said they are looking for a permanent injunction, or ban, from a federal court that would prohibit Amazon from engaging in these practices.