Home

Amazon faces major antitrust lawsuit in the US

PUBLISHED

2023-09-27

Content

America's Federal Trade Commission (FTC) and 17 states are suing Amazon over allegations that the e-commerce giant abuses its marketplace dominance to inflate prices both on and off its platform, overcharge sellers, and stifle competition.

The lawsuit was filed on Tuesday in federal court in Amazon's home state of Washington and is the result of a years-long investigation into the company's business practices.

This legal challenge represents one of the most significant in Amazon's nearly 30-year history, with some US competition law experts suggesting it could set a precedent for legal actions against other tech giants.

The lawsuit is expected to draw international attention, especially in countries like the UK, Europe, and Australia, where Amazon operates its online platform.

Following the announcement of the lawsuit, Amazon's shares dropped by more than 4%, hitting their lowest point since early June at $US125.98.

The FTC and the 17 states allege that Amazon is in violation of both federal and state antitrust laws and are seeking a permanent injunction to restrain the company from its alleged unlawful activities and to restore healthy competition.

The complaint accuses Amazon of engaging in anti-competitive practices, such as discouraging sellers from offering lower prices on non-Amazon websites, which mirrors allegations made in another legal action filed in 2022 by California.

Furthermore, the lawsuit contends that Amazon charges high fees to sellers, forcing them to increase their prices on the platform and other e-commerce sites to remain competitive.

FTC Chairman Lina Khan emphasized, "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."

Amazon, in response, argued that the FTC's claims are incorrect and that the agency has departed from its role of protecting consumers and competition. The company's General Counsel, David Zapolsky, stated, "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 lawsuit also alleges that Amazon compels sellers to use its logistics service, Fulfillment by Amazon, to qualify for Amazon Prime, even when they prefer other services.

Some estimates suggest that Amazon controls around 40% of the e-commerce market, with a majority of its sales facilitated by independent small- and medium-sized businesses. In return for access to its platform, Amazon generates billions in revenue through referral fees and advertising services, making third-party sellers' products more visible.

The majority of third-party merchants also rely on Amazon's fulfillment service, which has seen consistent fee increases. In the June quarter, Amazon reported $US32.3 billion in revenue from third-party services, surpassing the revenue generated by its highly profitable Amazon Web Services, which totaled $US134.4 billion for the same quarter.

Author