A lawsuit filed by the Federal Trade Commission and 17 states alleges that Amazon has created a monopoly and used its prominence in the marketplace to inflate prices, overcharge sellers, and degrade the quality of products.
The lawsuit, filed in Washington state on Tuesday, claims that Amazon “uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power,” according to an FTC press release.
The FTC went on to say that Amazon is not a monopoly because of its size but rather because of conduct that prevents the growth and emergence of other companies.
“By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance,” reads the press release. “Amazon’s far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch hundreds of thousands of products sold by businesses big and small, and affect over a hundred million shoppers.”
The lawsuit alleges that Amazon “exploits its monopolies in ways that enrich Amazon but harm its customers.”
Such allegations include increasing the fees sellers must pay while knowing that sellers cannot sell their products on another site due to Amazon’s market dominance.
Similarly, the lawsuit alleges that Amazon punishes sellers who offer lower prices on other platforms by burying the sellers’ products “beneath advertisements, making them harder to find and less likely to be clicked.”
Many sellers on the site allegedly “live in constant fear” that the company will choose to punish them.
“Moreover, Amazon’s one-two punch of seller punishments and high seller fees often forces sellers to use their inflated Amazon prices as a price floor everywhere else. As a result, Amazon’s conduct causes online shoppers to face artificially higher prices even when shopping somewhere other than Amazon,” reads the lawsuit.
John Newman, deputy director of the FTC Bureau of Competition, said, “Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers.”
David Zapolsky, general counsel and senior vice president of global public policy at Amazon, said in a statement that the lawsuit “makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition.”
“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,” Zapolsky 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. The lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court,” he added.
The FTC and the states involved are seeking a permanent injunction that would prevent the company from “engaging in its unlawful conduct and pry loose Amazon’s monopolistic control to restore competition.”