"Amazon Faces Antitrust Lawsuit by U.S. and 17 States, Accused of Driving Up Prices with Monopolistic Practices"

The Federal Trade Commission (FTC) and 17 state attorneys general have filed a comprehensive antitrust lawsuit against Amazon, accusing the company of using its power to exploit merchants and hinder competitors. The lawsuit claims that these actions have led to higher prices and lower-quality products for the millions of American households that regularly shop on Amazon. The suit argues that merchants who rely on Amazon are forced to pay various fees, which ultimately trickle down to consumers. The regulators also allege that the presence of "pay-to-play advertisements" on Amazon's platform degrades the services provided to customers. This lawsuit is seen as a significant test for both Amazon and the regulators who have long promised to address its alleged monopolistic practices. FTC Chair Lina Khan, who has been closely associated with the e-commerce giant, gained attention for her paper on "Amazon's Antitrust Paradox," which argues that current antitrust laws should be more aggressively enforced. However, this lawsuit focuses on the impact on consumer prices, with the FTC claiming that Amazon collects a significant portion of sellers' earnings through fees and incentives, effectively resulting in a "50 percent Amazon tax" that is passed on to shoppers. Amazon's Senior Vice President of Global Public Policy and General Counsel, David Zapolsky, has stated that the lawsuit is incorrect in terms of both facts and the law, and warns that it could lead to fewer product choices, higher prices, slower deliveries, and reduced options for small businesses. The FTC began investigating Amazon in 2019, but the probe expanded under Khan's leadership. The relationship between the agency and the company became more contentious, with Amazon filing a petition demanding Khan's recusal from the case due to her criticism of the company. The lawsuit against Amazon is the most significant regulatory threat it has faced in its nearly 30-year history. It comes at a time when other tech giants, such as Google and Facebook, are also facing antitrust scrutiny. Unlike some of the other cases, the FTC's lawsuit does not explicitly seek to break up Amazon's business, but it does mention that structural changes to the company could be considered as potential remedies.
During an event hosted by Bloomberg, Khan responded to questions about a potential breakup by saying that they will address the issue of remedy when the time comes. Amazon has come a long way since its early days as a book e-tailer startup in Bezos's garage in 1994. It is now the second-largest private employer in the United States, with a global workforce of over 1.4 million people in various sectors such as healthcare, entertainment, and devices. Over the years, Amazon has acquired companies like Whole Foods, Zappos, One Medical, and MGM, among others, and has built a logistics network that rivals UPS in size.

While many customers view Amazon as a retailer, its website expanded in 2000 to include a marketplace similar to eBay, where third-party merchants can sell their products. This aspect of the business has grown significantly over the past two decades and now accounts for 60% of total units sold on the site in the company's most recent quarter. Amazon also offers seller services, which generated approximately $32.3 billion in revenue in the same quarter. In addition, its advertising business brought in an extra $10 billion.

The FTC's case against Amazon focuses on how the company treats third-party sellers. The FTC argues that "anti-discounting measures" implemented by Amazon prevent these sellers from offering lower-priced goods than Amazon itself, resulting in higher prices for consumers across the internet. A key element of the FTC's allegations is Amazon's Fulfillment by Amazon program, which allows third-party sellers to store, pack, and ship their products through Amazon's logistics network. This program has been crucial for sellers to qualify for Prime shipping, a feature that guarantees two-day delivery and is part of Amazon's bundled membership. Most sellers opt to pay Amazon to handle their fulfillment needs, although some choose to ship Prime products themselves.

Khan alleges that sellers who don't use Amazon's fulfillment services see their products practically disappear from the site. She points to a 2014 letter from Bezos to shareholders, where he describes the fulfillment services as the "glue" that connects Amazon's marketplace with its Prime service. According to Khan, this program traps sellers and limits the market for independent fulfillment providers.

Furthermore, Amazon's advertising business incentivizes businesses to pay for keywords or product placement to improve their visibility in the company's search results. Many sellers argue that this tactic is necessary for success on the platform. Previous reports have highlighted how these ads can be misleading for consumers, making it difficult to distinguish between paid placements and organic search results.

The FTC's complaint states that Amazon's search results are cluttered with advertisements, and on mobile devices, these ads are often the only visible results without scrolling. Khan argues that in a competitive market, a monopoly raising prices and providing subpar service would create opportunities for rivals. However, Amazon's alleged monopolistic strategy has closed off these possibilities, leading to negative consequences for the public.

The lawsuit references an internally named algorithm called "Project Nessie," which the FTC claims undermines Amazon's claim of being customer-centric. However, details about this tool have been redacted from the complaint.

Steven Pope, owner of Age of Sage, a soap brand sold on Amazon for six years, believes that the company has stacked the odds against sellers like him. He has faced numerous issues with the platform, including the recent removal of his brand registry without explanation, which required him to spend days petitioning Amazon to reinstate it.

Pope, the owner of My Amazon Guy, a consultancy for sellers, acknowledges the benefits of selling on Amazon, such as its extensive reach and the ease of starting a business on the platform. However, he emphasizes that succeeding on Amazon requires a high level of sophistication and business acumen. He believes that sellers on Amazon are successful despite the platform, not because of it.

The antitrust lawsuits against Amazon revolve around the definition of the market that the company allegedly monopolizes. The Federal Trade Commission (FTC) accuses Amazon of monopolizing two markets: "online superstores" and "online marketplace services." Amazon argues that the FTC's complaint is a distortion of the broader retail market, as many purchases still occur in physical stores.

Traditionally, U.S. competition policy has focused on high consumer prices as an indicator of monopoly power. However, Khan and other advocates argue that Amazon harms competition through predatory pricing and unfair treatment of smaller businesses that rely on its platform. They advocate for a more aggressive antitrust policy to regulate internet giants like Amazon.

Despite their efforts, antitrust advocates have faced setbacks in court, particularly in attempts to block major tech mergers. Khan has also faced political scrutiny, especially from House Republicans investigating her agency's probe into Elon Musk's X. The majority of the state attorneys general who joined the FTC's lawsuit against Amazon are Democrats.

State attorneys general have also brought their own competition challenges against Amazon. California accused the company of stifling competition by penalizing sellers who offer lower prices elsewhere. A federal judge blocked Amazon's attempt to dismiss the California suit, and it is expected to go to trial in 2026. The D.C. attorney general's similar lawsuit was dismissed last year.

In May, the FTC settled two narrower lawsuits against Amazon related to Ring and its recordings of children's voices using Alexa. Amazon has also faced congressional hearings regarding its practices, including allegations of using third-party seller data to gain an advantage for its own products.

The success of the case against Amazon will depend on how long it takes to go to trial. These cases can take years to navigate through the judicial system, making it challenging for the government to present a convincing case and obtain the desired remedy, according to William E. Kovacic, a law professor and former Republican FTC chair at George Washington University.

However, Kovacic believes that the lawsuit will undoubtedly impact Amazon's business practices, especially in terms of how it treats its sellers. He states that the mere existence of the litigation will make the company more cautious and restrained in its actions. While the effect may not be significant or immediate, it will still have an inhibiting effect on Amazon. Kovacic emphasizes that there is no benefit for Amazon to worsen the situation further, as the fire is already burning.
طلحة عبد الكريم
By : طلحة عبد الكريم
مدير و محرر مدونة الموقع التقني.