FTC files “the big one,” a lawsuit alleging Amazon illegally maintains monopoly

The Federal Trade Commission and 17 state attorneys general today sued Amazon, claiming the online retail giant illegally maintains monopoly power.

"Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies," FTC Chair Lina Khan said. "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. Today's lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition."

The FTC announced that it filed the lawsuit in US District Court for the Western District of Washington. The FTC press release said it is "seeking a permanent injunction in federal court that would prohibit Amazon from engaging in its unlawful conduct and pry loose Amazon's monopolistic control to restore competition."

The lawsuit seeks declarations that Amazon's conduct violates federal and state laws. It asks for an injunction prohibiting the conduct described in the lawsuit along with unspecified "structural relief" that would be "necessary to redress and prevent recurrence of Amazon's violations of the law." Structural relief could involve breaking up the company.

Joining the FTC in the lawsuit are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.

Focus on seller fees and restrictions

The lawsuit was expected for several months and has been referred to as "the big one," a major lawsuit following several previous FTC complaints against Amazon. The FTC alleged that "Amazon's anticompetitive conduct occurs in two markets—the online superstore market that serves shoppers and the market for online marketplace services purchased by sellers." The FTC described Amazon's alleged monopolistic tactics as follows:

• Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping prices higher for products across the Internet. For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon's search results that they become effectively invisible.

• Conditioning sellers' ability to obtain "Prime" eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon's costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors' ability to effectively compete against Amazon.

The FTC claimed that "Amazon's illegal, exclusionary conduct makes it impossible for competitors to gain a foothold," and that the company "extracts enormous monopoly rents from everyone within its reach." The FTC said Amazon's fees "force many sellers to pay close to 50 percent of their total revenues to Amazon," harming the sellers and shoppers "who pay increased prices for thousands of products sold on or off Amazon."

The FTC also said that Amazon harms customers "by replacing relevant, organic search results with paid advertisements" and "preferenc[ing] Amazon's own products [in search results] over ones that Amazon knows are of better quality."

Amazon: FTC “wrong on the facts and the law”

Amazon issued a short response claiming that the FTC lawsuit "is wrong on the facts and the law."

"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," Amazon Global Public Policy & General Counsel David Zapolsky wrote.

A previous FTC lawsuit filed in June alleged that Amazon violated US law by tricking consumers into signing up for the $14.99-per-month Amazon Prime subscription service and making it annoyingly difficult to cancel.

The FTC also previously filed a privacy lawsuit with allegations related to kids' Alexa voice recordings and another lawsuit with allegations that Amazon's Ring division invaded users' privacy by "allowing thousands of employees and contractors to watch video recordings of customers' private spaces." Amazon agreed to settle both lawsuits by paying financial penalties and changing privacy practices.