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FTC Suit Accuses Amazon of Running Illegal Monopoly

The Federal Trade Commission (FTC) has sued Amazon, charging the retail giant with “illegally [maintaining] its monopoly power.”

The antitrust lawsuit, filed Tuesday (Sept. 26) by the FTC and 17 states, alleges that Amazon uses unfair, anti-competitive strategies to block other merchants from success.

“The complaint alleges that Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging,” the commission said in a news release.

In an emailed statement to PYMNTS, Amazon pushed back against the charge. 

“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” David Zapolsky, Amazon senior vice president of global public policy and general counsel, said. “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 statement continued. “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 lawsuit alleges Amazon’s anti-competitive conduct takes place in both its online superstore and the market for online services purchased by sellers.

More specifically, the FTC and the states accuse Amazon of “anti-discounting measures” that punish sellers and keep other online retailers from offering prices lower than Amazon.

“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,” the FTC said.

The commission also accuses Amazon of making sellers’ ability to get “Prime” eligibility for their products—”a virtual necessity for doing business on Amazon”— conditional on sellers using Amazon’s fulfillment service. The FTC calls this “unlawful coercion” which has hindered other companies’ ability to compete against Amazon.

“By stifling competition on price, product selection, quality and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance,” the FTC said. 

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

The suit comes as Amazon is already facing a number of other state and federal lawsuits around the country over its pricing practices, fulfillment operations and its relationships with major book sellers, the report said.

For example, California’s attorney general filed an antitrust suit against Amazon last year, alleging the company stifles competition and increases the prices consumers pay.

“The everything store has effectively set a price floor, costing Californians more for just about everything,” Rob Bonta, California’s attorney general, said during a news conference at the time.

In April, a judge in California denied Amazon’s motion to dismiss the suit, saying the state had made a credible argument that Amazon’s policies have led to higher prices for competing retail marketplaces and third-party sellers’ websites.

Meanwhile, Amazon also faces two consumer lawsuits in federal court in Seattle, one accusing the company of artificially inflating prices, the other claiming Amazon’s policies have driven up prices of products sold by other retailers, with the prospective class action case estimating damages of between $55 billion and $172 billion.

In the latter case, U.S. District Judge Richard Jones ruled in March that Amazon must face consumer claims that its pricing practices artificially drove up the cost of goods sold by other retailers in violation of U.S. antitrust law. 

And earlier this month, U.S. District Judge John Chun ruled that the customers — five residents from California and Maryland who said they are regular Amazon shoppers — could move ahead with their suit challenging Amazon’s pricing policies.

Amazon has denied the claims in both cases.

The company is also facing a separate FTC suit, filed earlier this year and claiming the company tricked users into signing up for the Prime subscription service and made it intentionally difficult to cancel. Amazon is contesting those allegations.