Dive Brief:
- The Biden administration has moved antitrust law into new areas with its focus on labor, data, and other non-traditional harms, but in going after the online retail giant, the Federal Trade Commission is citing old-fashioned consumer harm.
- The Federal Trade Commission and 17 states sued Amazon on Tuesday, accusing the company of wielding its monopoly power to keep prices high even while lowering the quality of the consumer shopping experience.
- “Amazon is 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 Chair Lina Khan said in a statement.
Dive Insight:
Both the FTC and the Department of Justice have stepped up their antitrust efforts in the past two years, taking a number of high-profile and under-the-radar actions that in many cases have moved the boundaries of antitrust law into new areas. Among other things, the agencies have brought cases or taken other actions against companies on the basis of labor-market impacts, data concentration and what the agencies call interlocking directorates in which directors sit on the boards of competing businesses, potentially enabling those businesses to act in concert with one another.
In its sweeping, 172-page complaint against Amazon’s core business — its online superstore and the underlying marketplace that enables sellers to be part of it — the FTC is going after the company on traditional consumer harm grounds.
By using measures that deter sellers from lowering their prices below a floor set by Amazon, even if they’re offering the lower price elsewhere than on Amazon, the company is keeping prices across the internet artificially high, the FTC says.
“For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible,” the FTC says.
And by conditioning sellers’ ability to obtain “Prime” eligibility for their products — what FTC calls a virtual necessity for doing business on Amazon — the company forcibly raises sellers’ costs, which get passed on to consumers. “Sellers have little choice but to use FBA [fulfillment by Amazon],” the FTC says in its complaint. These costs increased 30% in just the two-year period between 2020 and 2022.
At the same time, the consumer shopping experience has degraded over time as Amazon has used its search algorithm to favor sponsored sellers and relegate other sellers to far down in the search results.
“In a competitive world, a monopoly hiking prices and degrading service would create an opening for rivals and potential rivals to come in, draw business, grow and compete,” FTC Chair Khan said at a briefing this week. “But Amazon’s unlawful monopolistic strategy has closed off that possibility, and the public is paying directly as a result.”
In a statement, David Zapolsky, Amazon general counsel and senior vice president of global public policy, called the FTC wrong on the facts and the law.
“The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store,” he said. “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.”
This is a developing story. Access the FTC antitrust lawsuit against Amazon on Politico’s website.
