The Federal Trade Commission (FTC) is out for Amazon once again. Today, it sued the online retailer for allegedly monopolizing the industry. In June of 2023 year, the commission sued it for allegedly signing people to Prime without consent.
The FTC along with 17 other attorneys believes that the business utilizes anticompetitive and unfair strategies to maintain its monopoly. The officials also suggest that Amazon allegedly prevents rivals from competing against it and lowers the quality of products, thus putting consumers at a disadvantage.
The basis for the lawsuit is not the size of the company, but rather Amazon’s exclusionary conduct that restricts new competitors from entering the industry and makes survival difficult for existing ones. The lawsuit reasons that by stifling competition on price, product selection, and quality, Amazon continues to protect its dominant position.
FTC Chair Lina M. Khan further mentioned:
“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies. 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.”
According to the FTC, anti-competitive conduct occurs in two markets— the online superstore market that serves shoppers and the market for online marketplace services purchased by sellers. It includes tactics such as 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.
Secondly, conditioning sellers’ ability to obtain “Prime” eligibility for their products on sellers using Amazon’s costly fulfillment service, which has made it substantially expensive for sellers on Amazon to also offer their products on other platforms.
The FTC adds that Amazon benefits from monopoly rents by degrading the customer experience by replacing relevant, organic search results with paid advertisements, biasing Amazon’s search results to preference Amazon’s products instead of products that are of better quality, and charging expensive fees on the hundreds of thousands of sellers that must currently rely on Amazon to stay in business.
Sellers on the platform have to pay fees like a monthly fee for every item sold and advertising fees that have now become a necessity for the sellers. This means that the total fees the sellers pay are close to 50% of their revenues to Amazon.
Therefore to prevent Amazon from continuing the alleged misconduct and loosen its monopoly, the FTC and the state partners are aiming for a permanent injunction in the federal court.
Connecticut, Delaware, New Mexico, Nevada, New York, Maine, Maryland, Minnesota, New Jersey, New Hampshire, Massachusetts, Michigan, Pennsylvania, Rhode Island, Oklahoma, Oregon, and Wisconsin joined the Commission’s lawsuit. The Commission vote to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Western District of Washington was 3-0.