US: Amazon antitrust actions hurt consumers

Suit alleges the e-retailer boosted its own products, ‘peppered’ search with ads

WASHINGTON — The Federal Trade Commission and 17 states sued Amazon on Tuesday, setting up a long-awaited antitrust fight with the ecommerce giant that could alter the way Americans shop for everything from toilet paper to electronics online.

The 172-page suit, the federal government’s most significant challenge to the power of the online store, accused Amazon of protecting a monopoly over swaths of online retail by squeezing merchants and favoring its own services.

For consumers, that meant “artificially higher prices” as merchants were blocked from selling their products for less on other sites, and a worse shopping experience as Amazon boosted its own products and peppered its search results with ads, the lawsuit said. The retailer’s tactics made it impossible for its rivals to compete, the agency and states said.

“A single company, Amazon, has seized control over much of the online retail economy,” said the lawsuit, which was filed in US District Court for the Western District of Washington. “It exploits its monopolies in ways that enrich Amazon but harm its customers: both the tens of millions of American households who regularly shop on Amazon’s online superstore and the hundreds of thousands of businesses who rely on Amazon to reach them.”

The states involved in the case are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.

The lawsuit put the influence and reach of Amazon, a $1.3 trillion behemoth, squarely in the spotlight after years of mounting scrutiny. Founded by Jeff Bezos in 1994, the onetime upstart online bookseller has grown into a sprawling conglomerate with tentacles in retail, Hollywood, and the foundational infrastructure of the internet.

Much of the Seattle-based company’s power has emanated from its online marketplace, sometimes known as an “everything store” for the range of products it sells and the speed with which it delivers them. Amazon’s sway over online commerce has shaped the lives of merchants around the world, set the working conditions for more than 1 million warehouse workers, and pushed the US Postal Service to deliver on Sundays.

Now Amazon, which denied the accusations in the lawsuit, has become the latest Big Tech company to face off against the government over monopoly concerns, just as the Justice Department has entered the third week of an antitrust trial chal

lenging Google over its power in online search. The FTC has also brought an antitrust lawsuit against Meta, which owns Instagram, Facebook, and WhatsApp. Members of Congress have considered legislation to regulate some of the companies’ most common business practices.

The new lawsuit pits Amazon directly against FTC Chair Lina Khan in a long-awaited confrontation. She rose to fame as a Yale law student in 2017 when she published a paper arguing that US antitrust laws had failed to adequately stop Amazon from amassing power over its customers, competitors and suppliers. The paper helped kick off a debate about whether US antitrust laws needed to be modernized to rein in tech giants.

“If we succeed, competition will be restored and people will benefit from lower prices, greater quality, greater selection as a result,” Khan said of the lawsuit.

The FTC asked the court to issue an injunction blocking Amazon from engaging in “unlawful conduct” and raised the possibility of altering the structure of the company. But it stopped short of detailing how the court could clip Amazon’s dominance, such as breaking apart elements of its business. The agency could become more specific if it succeeded in proving Amazon violated the law.

David Zapolsky, Amazon’s general counsel, said in a statement that the FTC “is wrong on the facts and the law” with the lawsuit, portions of which were heavily redacted. He said the complaint showed the agency’s “focus has radically departed from its mission of protecting consumers and competition.”

“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,” he added.

Amazon, which generates more than $500 billion in annual revenue, has continued growing despite the scrutiny. In the past three years, it bought One Medical, a chain of primary care practices; Roomba manufacturer iRobot; and fabled movie studio Metro-Goldwyn Mayer, giving it a major stake in the James Bond franchise. These deals have added to an empire that includes its online superstore, cloud computing services that power wide areas of the web, and a streaming service that competes with rivals like Netflix.

The FTC’s competition team began investigating Amazon’s business in summer 2019, with no shortage of complaints about the company’s business practices from critics and rivals.

Amazon’s critics said it had strong-armed sellers that offered goods on its platform, forcing competitors into punishing price wars and boosting the products it makes itself over those supplied by outside merchants. Its interlocking control of different parts of online retail — from the storefront to the delivery vans that take packages to consumers’ doorsteps — allowed it to dominate competitors, they said. In a report published in 2020, staff on the House Judiciary Committee, which included Khan, found “that Amazon functions as a gatekeeper for e-commerce.”