YCD News – On Tuesday (Sept. 26), the U.S. Federal Trade Commission (FTC) and the attorneys general of 17 states filed an antitrust lawsuit against Amazon, alleging that the e-commerce giant has abused its power to jack up the price of its goods, discourage competitors from expanding, and tie up merchants with predatory agreements.
The lawsuit, filed in the U.S. District Court for the Western District of Washington, is the result of a years-long investigation into Amazon’s business and one of the most significant legal challenges the company has faced in its nearly 30-year history.
The lawsuit alleges that Amazon uses discounts to penalize sellers, thus keeping the prices of goods online high. If Amazon discovers that a seller is selling for a lower price on a platform other than Amazon, such discounted sellers are not visible in buyers’ search results.
In addition, Amazon restricts the eligibility of sellers’ merchandise to be Prime-covered products for Amazon’s membership service, and if sellers want their merchandise to earn the Prime badge, they must use Amazon’s expensive delivery service, which makes it significantly more expensive for sellers to sell their merchandise on Amazon’s platforms.
The agency also accused Amazon of abusing its algorithms to make its search results more favorable for the company’s own products. That is, Amazon can boost the ranking of its own products in the search results for goods on its shopping platform, regardless of other, higher-quality products.
FTC Chairwoman Lina Khan said, “Amazon has taken control of much of the online retail economy. It uses its monopoly power to its own benefit, but at the expense of its customers, degrading the quality of service for the tens of millions of U.S. households that shop on Amazon’s platforms and the hundreds of thousands of businesses that rely on Amazon to reach them.”
The lawsuit puts Amazon, the $1.3 trillion e-commerce giant, in the spotlight, according to the report.Jeff Bezos founded Amazon in 1994, and what was once an online bookstore has grown into a conglomerate with businesses in retail, Hollywood movies and television, and Internet infrastructure.
In response to the allegations, Amazon responded that it will challenge the FTC’s lawsuit in court, accusing the agency of radically departing from its mission to protect consumers and of being wrong on both the facts and the law. It also accused the FTC of overstepping its authority and stifling competition instead of promoting it.
David Zapolsky, Amazon’s general counsel, said in a statement that the FTC’s alleged behavior actually fosters competition and innovation in the retail industry by giving consumers more choices, lowering the price of goods, increasing the speed of delivery, and giving more opportunities to buyers across many Amazon platforms. If the court were to satisfy the FTC’s claims, the results would be counterproductive.
YCD has learned that the FTC is seeking a permanent injunction in federal court to enjoin Amazon from engaging in unlawful conduct and to pry Amazon’s monopoly control to restore fair competition.
The FTC has not outlined specific details of possible remedies, however, it has previously been suggested that the agency may ask a judge to reorganize Amazon if it wins the lawsuit, possibly ordering the company to divest its logistics business and other business units.