FTC, 17 states, sue over prices, overcharging sellers
Amazon is being sued by U.S. regulators and and 17 states over allegations that the company abuses its position in the marketplace to inflate prices on other platforms, overcharge sellers and stifle competition.
The lawsuit, filed Tuesday in U.S. District Court for the Western District of Washington, is the result of a years-long investigation into Amazon’s businesses and one of the most significant legal challenges brought against the company in its nearly 30-year history.
According to a news release sent by the agency, the Federal Trade Commission and states that joined the lawsuit are asking the court to issue a permanent injunction court that they say would prohibit Amazon from engaging in its unlawful conduct and loosen its “monopolistic control to restore competition.”
They allege the company engages in anti-competitive practices through anti-discounting measures that deter sellers from offering lower prices for products on non-Amazon sites, mirroring allegations made in a separate lawsuit last year by the state of California. The complaint says Amazon can bury listings that are offered at lower prices on other sites.
The complaint also says the company degrades the customer experience by replacing relevant search results with paid advertisements, biasing its own brands over other products it knows to be of a better quality and charging heavy fees that forces sellers to pay nearly half of their total revenues to Amazon.
“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 Chairman Lina Khan said in a prepared statement.
Many had wondered whether the agency would seek to a forced break-up of the retail giant, which is also dominant in cloud computing and has a growing presence in other sectors like groceries and health care. In a briefing with reporters, Khan dodged questions of whether that will happen.
“At this stage, the focus is more on liability,” she said.
Some estimates show Amazon controls about 40% of the e-commerce market.
A majority of the sales on its platform are facilitated by independent sellers consisting of small and mediumsized businesses and individuals. In return for the access it provides to its platform, Amazon rakes in billions through referral fees and other services like advertising, which 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 been consistently raising fees for those reliant on the program and more recently imposed, and then abandoned, another fee on some who don’t, a move that was blasted by the company’s critics.