FTC And 17 States File Lawsuit Against Amazon For Illegally Maintaining Online Retail Monopoly

The Federal Trade Commission and 17 state attorneys general on Tuesday filed a landmark lawsuit against Amazon for illegally maintaining monopoly power through anticompetitive and exclusionary practices.

The 172-page complaint outlines the e-commerce giant’s “far-reaching schemes” to prevent current competitors from growing and new competitors from emerging, ensuring 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,” FTC Chair Lina M. Khan said in a statement.

The complaint alleges two spheres of anticompetitive conduct: the online store that serves shoppers and the marketplace services purchased by sellers.

According to the complaint, Amazon punishes sellers in its marketplace and deters other online retailers from offering prices lower than Amazon’s by burying discounting sellers “so far down in Amazon’s search results that they become effectively invisible.”

Amazon also allegedly requires sellers to use the company’s “costly” fulfillment service in order to obtain “Prime” eligibility, a form of “unlawful coercion” that limits other sellers’ ability to compete against Amazon.

With their monopoly power in place, Amazon is able to “degrade the customer experience” by replacing relevant search results with paid advertisements, biasing search results toward their own products, and charging high fees to sellers who must rely on Amazon’s online marketplace to do business.

“Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon. These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon,” the FTC said in a statement.

“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, Deputy Director of the FTC’s Bureau of Competition. “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”

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 lawsuit.

The plaintiffs are seeking a permanent injunction to prohibit Amazon’s unlawful conduct and other equitable relief in the U.S. District Court for the Western District of Washington.