The Federal Trade Commission and states allege that Amazon’s anticompetitive action occurs in two markets: the online superstore that serves shoppers and the market for online marketplace services purchased by sellers. The actions include, according to the FTC:
— Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon's, keeping prices higher for products across the internet. For example, the FTC says, 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.
— Conditioning sellers’ ability to obtain “Prime” eligibility for their products — a virtual necessity for doing business on Amazon — on sellers using Amazon’s fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. "This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon,” the FTC says.
With its amassed power across both the online superstore market and online marketplace services market, Amazon extracts "enormous monopoly rents from everyone within its reach,” the FTC says. And this includes:
— Degrading the customer experience by replacing relevant, organic search results with paid ads — and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their ad purchase.
— Biasing Amazon’s search results in favor of Amazon’s own products over ones Amazon knows are better quality.
— Charging fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. These fees range from a monthly fee sellers have to pay for each item sold, to ad fees. Combined, these fees force many sellers to pay nearly 50 percent of their total revenues to Amazon, the FTC says. These fees also harm shoppers, who pay increased prices for thousands of products sold on or off Amazon.
Amazon says the FTC is “wrong on the facts and the law” and has departed from its role 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,” said Amazon General Counsel David Zapolsky in a statement.
The FTC began investigating Amazon in 2019 under the Trump administration, but the probe significantly expanded after President Biden appointed Lina Khan to be chair of the FTC.
Khan became famous as a Yale law student in 2017 when she published a paper arguing that U.S. 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 America’s antitrust laws needed to be modernized to rein in tech giants, says The New York Times.
Prior to becoming FTC chair, Khan was an associate professor of law at Columbia Law School. She also previously served as counsel to the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law; legal adviser to FTC Commissioner Rohit Chopra; and legal director at the Open Markets Institute.