Amazon sued by FTC and 17 states
Amazon is being sued by U.S. regulators 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 yearslong 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 medium-sized businesses and individuals. In return for the access it provides to its platform ,A mazon 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 abandonedanother fee on some
who don’t, a move that was blasted 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 SelfReliance, the fees cost U.S. sellers 45% of their revenue in the first half of this year up from 35% in 2020 and 19% in 2014.
Amazon has also long faced allegations of undercutting businesses that sell on its platform by assessing merchant data and creating its own competing product that it then boosts on the site. In August, the company said it was eliminating some in-house brands that weren’t resonating with customers and would relaunch some items under existing brands like Amazon Basics and Amazon Essentials. Booksellers and authors have also been urging the Department of Justice to investigate what they’ve called Amazon’s “monopoly power over the market for books and ideas.”