Amazon is being sued by U.S. regulators and 17 states over allegations that the company abuses its position in the market to drive up prices on other platforms, overcharge sellers and stifle competition.
The lawsuit, filed Tuesday in the U.S. District Court for the Western District of Washington, is the result of a years-long investigation into Amazon’s operations and one of the most significant legal challenges against the company in its nearly 30-year history.
According to a press release from the agency, the Federal Trade Commission and the states that joined the lawsuit are asking the court to issue a permanent injunction that they say would prevent Amazon from engaging in its unlawful conduct and its “Monopoly control to restore competition would be relaxed.”
They accuse the company of engaging in anti-competitive practices through anti-discounting measures that discourage sellers from offering lower prices for products on non-Amazon sites. This echoes allegations made by the state of California in a separate lawsuit last year. The complaint states that Amazon may bury deals that are offered at lower prices on other sites.
The complaint also states that the company degrades the customer experience by replacing relevant search results with paid advertising, favoring its own brands over other products that it knows are of better quality, and charging high fees to sellers forcing them to pay almost half of their total sales to Amazon.
“The complaint lays out detailed allegations suggesting that Amazon is now exploiting its monopoly power to enrich itself while simultaneously increasing prices and reducing service to the millions of American families who shop on its platform and the Hundreds of thousands of businesses that rely on Amazon are getting worse.” “They are reaching them,” FTC Chairwoman Lina Khan said in a prepared statement.
Many had wondered whether the agency would seek a forced breakup of the retail giant, which also dominates in cloud computing and has an increasing presence in other sectors such as food and healthcare. In a briefing with reporters, Khan dodged questions about whether that would happen.
“At this point, the focus is more on liability,” she said.
Some estimates show that Amazon controls around 40% of the e-commerce market. A majority of sales on its platform are facilitated by independent sellers consisting of small and medium-sized businesses and individuals. In return for access to its platform, Amazon rakes in billions through referral fees and other services such as advertising that makes products sold by sellers more visible on the platform.
The vast majority of third-party merchants also use the company’s fulfillment service to store inventory and ship items to customers. Amazon has continued to increase fees for those who rely on the program more recently another fee was charged and then abandoned to some who don’t, a move that was roundly criticized by the company’s critics.
Last quarter, Amazon reported $32.3 billion in revenue from third-party services. According to the anti-monopoly organization Institute for Local Self-Reliance, the fees cost U.S. sellers 45% of their sales in the first half of this year – up from 35% in 2020 and 19% in 2014.
Amazon has also long faced accusations of undercutting companies that sell on its platform by evaluating retailer data and developing its own competing product, which it then promotes on the website. In August, the company said it would eliminate some private labels that didn’t resonate with customers and relaunch some items under existing brands such as Amazon Basics and Amazon Essentials. Booksellers and authors have also called on the Justice Department to investigate what they call Amazon’s “monopoly power over the market for books and ideas.”
Amazon did not immediately respond to a request for comment on Tuesday.
If successful, a lawsuit could be a big boost for the FTC’s Khan, a Big Tech critic who rose to prominence as a Yale law student in 2017 with her academic paper “Amazon’s Antitrust Paradox.” In 2021 Amazon had tried to achieve their reuse excluded from official investigations against the company because of their previous criticism.
Under Khan’s watch, the FTC has aggressively sought to blunt Big Tech’s influence, but has been unsuccessful in some of the most high-profile cases of late, including its attempt to overturn Microsoft’s acquisition of video game maker Activision Blizzard and Meta’s virtual reality acquisition block startup within unlimited time. The agency is currently in the middle of a lengthy legal battle against Facebook parent company Meta, which is accused of monopolistic behavior. The Justice Department is also questioning Google’s market power in court.
Some of the agency’s allegations in the Amazon case echo those made in a separate lawsuit brought by the state of California last year. A similar case filed by the District of Columbia was dismissed by a federal judge early last year and is currently under appeal.
The federal complaint follows other actions the FTC has taken against Amazon in recent months. In June, the agency sued the company, alleging it used deceptive practices to sign up consumers for Amazon Prime and makes it difficult for them to cancel their subscriptions. Amazon denies the allegations.
In late May, the company agreed to pay a $25 million civil penalty Allegations clarify that it violated a law protecting children’s privacy and parents misled about data deletion practices of the popular voice assistant Alexa.