Amazon is under fire from the US anti-trust regulator for practices the FTC and 17 state attorneys say are illegal and exclusionary, which makes it impossible for competitors to gain a foothold and stifles innovation.
Though in a press release announcing the suit the FTC insists it is not suing because of Amazon’s size, the release does explicitly mentions the company’s retail dominance as a competition killer.
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The FTC goes on to call out specific practices as monopolistic and harmful to both businesses and consumers. The FTC specifically calls out Amazon’s search feature which the agency said is “degrading the customer experience” by switching out “relevant, organic search results with paid advertisements.” The agency claims this hurts both customers frustrated with “junk ads” and sellers who are trying to promote their own products by limiting the return on their advertising investment.
Amazon fees are an issue for FTC
The FTC also accused Amazon of running up costs for sellers who are reliant on the company to distribute their products. The claimed fees include monthly costs for each good sold and advertising fees. The FTC said these charges could force sellers to pay nearly 50% of their total revenues to Amazon. The agency said increased prices to compensate for these costs will then be passed on to shoppers.
FTC Chair Lina Khan has had Amazon in her sights since she outlined her case against Amazon’s anti-competitive practices in a 2017 Yale Law Journal article. Khan has prioritized taking Big Tech to task for anti-trust activities with attempts to block Meta Platforms’ $400m acquisition of virtual reality vendor Within and Microsoft’s $70m purchase of gaming company Activision Blizzard. Judges ruled in favour of the tech vendors in both cases.
Amazon shot back at the FTC with a statement from David Zapolsky, the company’s senior vice president, global public policy and general counsel. Zapolsky said that while he respects the consumer protection role the FTC has traditionally played, “it appears the current FTC is radically departing from that approach, filing a misguided lawsuit against Amazon that would, if successful, force Amazon to engage in practices that actually harm consumers and the many businesses that sell in our store.”
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By GlobalDataZapolsky goes on the refute the FTC claims, insisting that its practices keep prices down for consumers and provide important features for sellers. He adds the FTC’s claim that Amazon strong arms sellers to use its services “is simply not true.” Amazon notes that sellers can choose to use Amazon advertising and logistics services or not.
It isn’t a giant leap to see the objective of the suit to break up the company, possibly spinning out its Amazon Web Services business. Last year, Amazon’s retail businesses operated at a loss of $10.6bn. By comparison, AWS generated over $80bn in revenues and just under $23bn in operating profit. Without that subsidy, its retail business may hike prices and reduce product options.
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