The Federal Trade Commission and 17 states sued Amazon on Tuesday, launching a long-awaited antitrust fight with the e-commerce giant that could upend the way Americans shop for everything from toilet paper to electronics online.
The 172-page lawsuit, the federal government’s most significant challenge to the power of online retailers, accused Amazon of protecting a monopoly over sectors of online retail by pressuring merchants and favoring its own services.
For consumers, that meant “artificially higher prices” as merchants were prevented from selling their products for less on other sites, and a worse shopping experience when Amazon pushed its own products and peppered its search results with ads. , according to the demand. The retailer’s tactics made it impossible for its rivals to compete, the agency and the states said.
“A single company, Amazon, has taken control of much of the online retail economy,” says the lawsuit, which was filed in the U.S. 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 at Amazon’s online superstore and the hundreds of thousands of businesses that depend on Amazon to reach them.”
He lawsuit It put the influence and reach of Amazon, a $1.3 trillion giant, squarely in the spotlight after years of increasing scrutiny. Founded by Jeff Bezos in 1994, the once-upstart online bookseller has become a sprawling conglomerate with tentacles into retail, Hollywood and the Internet’s critical infrastructure.
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 influence on online commerce has shaped the lives of merchants around the world, set working conditions for more than a million warehouse workers and pushed the US Postal Service for Sunday deliveries.
Now Amazon, which denied the lawsuit’s allegations, has become the latest big tech company to take on the government over monopoly concerns, just as the Justice Department entered the third week of an antitrust trial challenging Google for its power in online searches. The FTC has also filed an antitrust lawsuit against Meta, the owner of Instagram, Facebook and WhatsApp. Members of Congress have considered legislation to regulate some of the most common business practices of companies.
The new lawsuit pits Amazon directly against Lina Khan, chairwoman of the FTC, in a long-awaited showdown. She rose to prominence as a Yale Law student in 2017 when she published an article in which she argued that US antitrust laws had failed to adequately prevent Amazon from accumulating power over its customers, competitors and suppliers. The document helped spark a debate over whether U.S. antitrust laws needed to be modernized to rein in tech giants.
“If we are successful, competition will be restored and, as a result, people will benefit from lower prices, higher quality and greater selection,” Ms. Khan said of the lawsuit.
The FTC asked the court to issue an injunction preventing Amazon from engaging in “unlawful conduct” and raised the possibility of altering the company’s structure. But he stopped short of detailing how the court could curtail Amazon’s dominance, such as by dismantling elements of its business. The agency could be more specific if it could prove that Amazon violated the law.
David Zapolsky, Amazon’s general counsel, said in a statement that the FTC “gets it factually and legally wrong” with the lawsuit, parts of which were heavily redacted. He said the complaint showed that the agency’s “approach has radically departed from its mission to protect 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 to grow despite the scrutiny. In the past three years, it purchased One Medical, a chain of primary care offices; Roomba maker iRobot; and the legendary Metro-Goldwyn Mayer film studio, 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 such as Netflix.
The FTC’s competition team began investigating Amazon’s business in the summer of 2019, and there was no shortage of complaints about the company’s business practices from critics and rivals.
Critics of Amazon said it had strong sellers offering products on its platform, forcing competitors to punish price wars and boosting the products it makes over those supplied by third-party merchants. Its intertwined control of different parts of online retail — from the storefront to the delivery vans that bring packages to consumers’ doors — allowed it to dominate competitors, they said. In a report published in 2020, the House Judiciary Committee staff, which included Ms. Khan, found “that Amazon serves as a gatekeeper to e-commerce.”
In June 2021, when President Biden appointed Ms. Khan as chair of the FTC, Amazon had provided the agency with documents and information, a person familiar with the investigation said. Under Khan’s leadership, a new team was formed to lead the antitrust investigation, the person said.
The relationship between Amazon and the FTC has been strained since Khan took over as head of the agency. Weeks after taking over as FTC chair, Amazon asked the agency to recuse her from antitrust matters involving the company.
Last year, Amazon moved to block the agency from interviewing Bezos and Andy Jassy, the company’s CEO, in a separate investigation into its Prime membership practices, accusing the FTC of “harassing” the executives. . In June of this year, the FTC sued the company as a result of that investigation, accusing it of violating consumer protection laws by misleading consumers into signing up for its Prime membership program.
With Tuesday’s announcement, the FTC joins government agencies around the world trying to probe Amazon’s influence on the economy.
In 2021, the attorney general of the District of Columbia accused Amazon of controlling prices on its website, but a judge dismissed the case last year. A similar but stronger case brought by California defeated Amazon’s attempt to dismiss it.
The FTC lawsuit also echoes charges brought by European Union regulators that caused Amazon to change some of its practices. The company last year agreed to a deal in Europe that will allow it to display deals from more merchants on individual product pages, and previously removed some contract language that prevented merchants from discounting products elsewhere.
Amazon is also selling off most of its private brands after they failed to generate substantial traction among consumers, a person familiar with the strategy said. In June, Announced Later this year it would reopen enrollment for a program that allowed merchants to sell their Prime-eligible products while handling deliveries themselves, without using Amazon warehouses.
Karen Weiss contributed reporting from Seattle.
