Lina Khan's FTC and 17 States Sue Amazon
Sep 27, 2023
Amazon.com AMZN) stock traded lower a day after the U.S. Federal Trade Commission (FTC) and 17 state attorneys generals sued the e-commerce giant, alleging it “is a monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”
The commission, chaired by Lina Khan, accuses the retailer of engaging in “exclusionary conduct [that] makes it impossible for competitors to gain a foothold. With its amassed power across both the online superstore market and online marketplace services market, Amazon extracts enormous monopoly rents from everyone within its reach.”
Luckbox has been covering Khan's perspective on Amazon's alleged anti-competitive practices since the middle of 2021.
A key element of the case by the FTC and the 17 states involves the dual role of e-commerce websites like Amazon.com and Walmart.com. Besides directly selling goods online, big retailers collect revenue from third parties that sell on the big-retailer platforms. In Amazon’s case, 60% of the units sold on its site are third-party.
The FTC and its allies claim “Amazon’s anticompetitive conduct occurs in two markets—the online superstore market that serves shoppers, and the market for online marketplace services purchased by sellers.”
A court decision in the government’s favor could, in theory, drive down retail prices by enabling competition. Such a ruling also might help Amazon competitors like Best Buy (BBY), eBay (EBAY), Target (TGT) and Walmart (WMT), attract more third-party sellers to set up shop on their online marketplaces—in addition to, or instead of Amazon’s marketplace.
To accomplish those goals, the FTC and its allies seek to change numerous practices, including those the government says Amazon uses to “coerce” third-party sellers on its site to use its Fulfillment by Amazon (FBA) service and punish sellers that sell products elsewhere online at lower prices than they offer on Amazon.
But Amazon plans to fight back aggressively, insisting the FTC's action would hurt consumers and marketplace sellers alike.
It its response, Amazon accused the FTC of getting things wildly wrong. In a statement, David Zapolsky, Amazon’s general counsel wrote:
“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” he wrote. Zapolsky contends the practices the FTC objects to “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.”
If the FTC prevails, Zapolsky wrote: “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 lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court.”
James Melton is managing editor of Luckbox magazine.
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