US trade regulator FTC sues Amazon for ‘illegal monopoly’

The US Federal Trade Commission (FTC) and attorney generals of 17 states have sued Amazon.com, Inc., claiming that the online retail and technology company uses “anticompetitive and unfair strategies to illegally maintain its monopoly power.”

The FTC and its state partners said Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.

Amazon shares declined 4% on Tuesday, following the filing of the lawsuit.

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.”

“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 complaint said.

Amazon’s far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch hundreds of thousands of products sold by businesses big and small and affect over a hundred million shoppers, it added.

FTC chairperson Lina M. Khan said, “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,” Khan said.

Amazon’s warning

In response to the lawsuit, the online retail firm warned that the FTC’s lawsuit “would lead to higher prices and slower deliveries for consumers—and hurt businesses.”

“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,” David Zapolsky, senior vice-president, global public policy and general counsel at Amazon, wrote.

“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,” Zapolsky said.

There are about 500,000 independent businesses of all sizes in the US who choose to sell on Amazon, and these businesses have created 1.5 million jobs. “We want them to succeed, we work hard to help them do so, and we’re very proud of their success,” Zapolsky added.

John Newman, deputy director of the FTC’s Bureau of Competition, said, “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.”

“Seldom in the history of US antitrust law has one case had the potential to do so much good for so many people,” Newman added.

The FTC and states allege 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, along with its state partners, said they are 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.

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 Commission’s lawsuit.

The Commission vote to authorize staff to file for a permanent injunction and other equitable relief in the US District Court for the western district of Washington was 3-0.