Antitrust scrutiny challenges Amazon and tests the Federal Trade Commission
4 min readThe core question is whether the company exploited its position to harm competitors and the agency’s regulatory power over tech firms
In a major antitrust case, the Federal Trade Commission and 17 state attorneys general allege that Amazon unlawfully eliminated competition, propelling it to global dominance. This landmark lawsuit presents a significant challenge to Amazon’s supremacy in online retail, raising critical questions about antitrust laws and the scope of the FTC’s authority.
The crux of this case revolves around whether Amazon, utilizing its substantial influence in the online retail sector, employed unlawful practices to undermine its competitors. These alleged tactics include penalizing sellers for offering lower prices elsewhere and exerting pressure on businesses to pay fees for access to its fulfillment services. The FTC is seeking a permanent injunction against several of Amazon’s business practices.
The complaint specifies accusations, emphasizing Amazon’s purported exploitation of its monopoly position to bolster its own profits, to the detriment of both American families who frequently shop on its platform and the numerous businesses relying on Amazon to reach their customers. Lina Khan, the FTC Chairperson, articulated these concerns in a statement.
Contrarily, Amazon has denied these allegations. David Zapolsky, Amazon’s general counsel, argued that the company’s practices have benefited consumers, promoting competition, and fostering innovation in the retail industry.
Amazon is accused of participating in illicit monopolistic practices in the online retail industry
The FTC, in the complaint, consistently depicts Amazon as a company intentionally suppressing competition and restricting consumer choices to protect its monopoly.
“In a competitive setting, Amazon’s decision to raise prices and reduce service quality would open avenues for competitors and potential new entrants to attract customers, build momentum, and grow. Nevertheless, Amazon has adopted an unlawful monopolistic strategy to prevent that possibility,” asserts the complaint.
The FTC, in collaboration with the states, asserts that Amazon implements measures against discounts, barring merchants on its platform from providing lower prices elsewhere. The company allegedly compels third-party sellers to use its expensive fulfillment services, requires merchants to utilize its delivery and fulfillment system to be eligible for the popular Prime subscription service, and prioritizes its own product line over others.
Amazon, through its general counsel Zapolsky, has provided a comprehensive response to the lawsuit. In this reply, Amazon argues that the FTC has a “fundamental misunderstanding of retail” and refutes any accusations of compelling sellers or consumers to buy its products.
The FTC’s goal is not to dismantle the company but to secure a lasting injunction from a federal court. This injunction would prohibit Amazon from engaging in its purported unlawful practices and seek to reduce Amazon’s monopolistic influence, thereby restoring competition.
The major tech companies face an imminent confrontation regarding antitrust concerns
The legal action against Amazon is part of a broader initiative to regulate the big tech sector, which includes congressional hearings, lawsuits led by state attorneys general, and prominent trials involving major companies such as Google.
Under the Trump administration, both the FTC and the US Department of Justice launched investigations into Google, Facebook, Apple, and Amazon. The Department of Justice has filed two lawsuits against Google, one of which is currently undergoing a high-profile trial.
Regarding Facebook, the FTC initiated a lawsuit during the Trump administration, and the current Biden administration’s FTC has continued to pursue the case. However, the FTC’s attempt to prevent Microsoft’s acquisition of Activision Blizzard, the creator of Call of Duty, was unsuccessful.
Under the leadership of Lina Khan, the FTC has embraced a more assertive stance in challenging the dominance of major tech companies. This approach aligns with broader government efforts to diminish the control exercised by a small number of major companies over industries such as online retail and internet search engines.
Lina Khan rose to prominence as a law student in 2017 when she penned a widely referenced paper in the Yale Law Journal, asserting that Amazon functioned as a predatory monopoly.
For some time, critics of the dominant positions held by major tech companies across various industries have been calling for more robust regulatory measures aimed at firms like Amazon and Google. As the FTC’s legal action against Amazon approached, a coalition of authors, booksellers, and an antitrust think tank released an open letter last month, urging the government to address Amazon’s influence on the publishing sector.
The letter emphasized apprehensions regarding how Amazon’s management of opaque algorithms and sales practices has impeded and distorted the open exchange of ideas. According to the letter, these practices are determined by publishers or authors willing and able to pay substantial fees to promote their books on Amazon’s platform.
On Tuesday, various tech reform organizations praised the legal action against Amazon, considering it a positive stride toward enforcing antitrust regulations and striving to break down tech monopolies.