The Federal Trade Commission (FTC) has accused Amazon of using its monopoly power to inflate prices, degrade quality and stifle innovation for consumers and businesses.
The US competition regulator and 17 state attorneys general have filed a lawsuit against the e-commerce giant after completing a year-long investigation into its business model. It is considered one of the biggest legal challenges the company has faced since its inception in 1994.
In the filing, the FTC alleged that Amazon maintained its dominant position in the marketplace through a series of “anti-competitive and unfair” strategies that harmed competitors.
Amazon has denied the allegations, saying the lawsuit is “wrong on the facts and law”.
As part of the suit, the FTC has asked the court to issue a permanent injunction that would prohibit Amazon from engaging in its unlawful conduct and loosen its “monopolistic control to restore competition”.
“The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them,” the FTC chairperson Lina Khan said in a statement.
The suit follows years of complaints that Amazon and other tech giants have become gatekeepers on the most profitable aspects of the internet.
In the filing, the FTC argues that Amazon forces sellers to pay for expensive fulfilment and advertising fees to market their goods on the site. Moreover, the company’s market dominance means sellers cannot opt to sell their products on a different platform as they would be penalised by Amazon.
According to Khan, sellers are paying $1 out of every $2 they make to Amazon.
“The upshot here is that Amazon is a monopolist and it’s exploiting its monopolies in ways that leave shoppers and sellers paying more for worse service,” Khan said. “In a competitive world, a monopoly hiking prices and degrading service would create an opening for rivals and potential rivals to come in, draw business, grow and compete, but Amazon’s unlawful monopolistic strategy has closed off that possibility, and the public is paying directly as a result.”
In response, Amazon published a statement saying that the lawsuit would hurt consumers by leading to higher prices and slower deliveries.
“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,” said David Zapolsky, Amazon’s general counsel.
“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 move is also part of a series of decisions taken by the Biden administration to try to curb the power of Big Tech platforms. In 2020, the White House issued a report that advocated reining in four tech giants: Amazon, Apple, Google and Facebook.
Amazon has been valued at over $1tn and controls 82 per cent of the online retail market, according to the complaint.
