Amazon has been sued by the US Federal Trade Commission, 17 states, and other entities. They claim that Amazon illegally abuses its monopoly to exploit consumers, impede competitors, and overcharge them.
The landmark lawsuit filed on Tuesday accused the $1.3tn online giant of increasing its fees for sellers so as to extract nearly half of each dollar of revenue generated by many sellers.
The FTC also claimed that Amazon punishes vendors who discount heavily by “effectively making them invisible” in search results, and forcing them to use their “costly” logistic network.
According to the complaint filed in federal district court in Seattle, “Most sellers now must pay for advertising in order to reach Amazon’s huge base of online buyers, while consumers are faced with less relevant search results, and are directed toward more expensive items.”
This lawsuit will be a major test of FTC Chair Lina Khal’s new enforcement approach towards Big Tech. She believes that Big Tech has avoided regulatory scrutiny for years.
Khan gained prominence in 2017 with an academic paper that called for the dissolution of Amazon.
Khan, in a press release, said that “our complaint outlines how Amazon has used punitive and deterrent tactics to illegally maintain its monopolies.”
David Zapolsky said that the lawsuit was “clear evidence” of the FTC’s departure from its mission to protect consumers and the competition.
He said, “The FTC’s lawsuit is incorrect on both the law and facts. We look forward to proving this in court.”
The complaint, which was heavily redacted, detailed how Amazon created and maintained an “online superstore”, attracting hundreds and millions of customers, as well as an “online market place” where other vendors can sell their products. This resulted in a behemoth amount of goods and information that rivals would not be able to match.
According to Jeff Bezos, the founder of Amazon, “building[ing] a lasting and important company” is “what [Jeff] Bezos” said. . . The complaint stated that “ecommerce simply won’t work with small volumes”.
The FTC claimed that Amazon’s monopoly was maintained by a sophisticated network of web crawlers which monitored whether Amazon sellers offered their products at a lower price on other websites and penalized those who did.
A complaint states that an Amazon internal study revealed that sellers were “always on edge” about such tactics. The lawsuit alluded also to an Amazon pricing scheme internally codenamed “Project Nessie”, which the FTC claimed had increased the company’s profit. Project Nessie was not revealed in full.
Amazon was also accused by the regulator of making “extensive” efforts to frustrate its investigation and “hide internal information”.
The FTC wants an order that Amazon ceases to engage in this allegedly illegal behavior.
In June, the FTC sued Amazon separately for allegedly tricking its customers into signing up to its service without consent. Amazon called the claims at the time “false in fact and law”.
The complaint filed on Tuesday said that although Amazon’s Prime Video service, which is part of a bundle of services for Prime members, was available as a stand-alone service, the company employed “dark patterns” in order to “thwart consumers” from signing up.
Amazon paid $25mn in May to settle a lawsuit filed by the FTC, the US Department of Justice and others accusing it of violating privacy laws for children via its Alexa voice-assistant.
Amazon requested Khan to be recused in matters involving Amazon, citing Khan’s longstanding criticism. However, its efforts failed. Khan responded that she did not have to recuse herself from a congressional hearing scheduled for 2021 when asked about her potential impartiality.
Top antitrust officials, including Khan and Jonathan Kanter (head of the DoJ antitrust unit), have increased enforcement efforts under the Biden administration in an effort to crackdown on corporate power.
Kanter sued Google for dominance in digital marketing, and another DoJ case accusing Google of monopolising Internet search is currently in trial.
The FTC wants Meta to undo its acquisitions on Instagram and WhatsApp. The FTC also tried to stop Meta’s acquisition by virtual-reality company Within but eventually backed down. After losing its initial court case, the FTC continues to try and block Microsoft’s purchase of Activision Blizzard.