The Federal Trade Commission (FTC) filed a massive antitrust lawsuit against Amazon on Tuesday, September 26, 2023. The lawsuit, which spans a hefty 172 pages, alleges that Amazon has been exerting monopolistic power to create unfair methods of competition.

The FTC, along with more than a dozen state attorneys general, accuses Amazon of unlawfully leveraging its market dominance to stamp out would-be competitors. The core of the case is whether Amazon used its immense power in the online retail industry to illegally disadvantage rivals.

The FTC alleges that Amazon has engaged in several unfair business practices. These include imposing anti-discounting measures that prohibit merchants who sell products on Amazon from offering lower prices elsewhere, strong-arming third-party sellers to use its expensive fulfillment services, requiring merchants to use the company’s delivery and fulfillment system in order to qualify for its popular Prime subscription service, and prioritizing the company’s in-house line of products over others.

The lawsuit was filed by Federal Trade Commission Chair Lina Khan who in 2017 wrote an influential academic article arguing that Amazon's structure and practices posed anti-competitive concerns and had escaped antitrust scrutiny.

"With its missionary zeal for consumers, Amazon has marched toward monopoly by singing the tune of contemporary antitrust," Khan then wrote in the Yale Law Journal. Amazon "has evaded government scrutiny in part through fervently devoting its business strategy and rhetoric to reducing prices for consumers."

Khan said on Tuesday that Amazon "has used a set of punitive and coercive tactics to unlawfully maintain its monopolies." She went on to further argue that Amazon is "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."

Amazon’s Response

In response, Amazon has stated that it will challenge the FTC’s lawsuit in court. The company argues that the lawsuit “radically” departs from the agency’s mission of protecting consumers and is “wrong on the facts and the law.” Amazon’s General Counsel, David Zapolsky, has stated that the company’s practices have benefited consumers, spurred competition, and led to innovation in retail.

"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," an Amazon spokesperson said in a statement.

The Implications

This lawsuit is consequential for both Amazon and the FTC. It presents a significant threat to Amazon’s dominance in the online retail industry and is a major test of antitrust law and the FTC’s power. If the FTC is successful, it could result in a permanent injunction prohibiting many of Amazon’s current business practices.

FTC Faces Stiff Competition

Several legal experts told Reuters that the FTC faces a high bar in trying to show that U.S. consumers would be better off in a world without Amazon's policies in place.

Antitrust lawyer David Balto, a former policy director at the FTC, described the FTC's hard climb ahead as trying to surmount Washington state's Mt. Rainier in tennis shoes. "You know, it's conceivable — you could get to the top — but it's 20,000 feet and it's going to be really cold," he said.

“As part of the case, Amazon will have a chance to assert pro-competitive justifications for its alleged conduct”, said antitrust lawyer Diane Hazel of law firm Foley & Lardner. Hazel said Amazon would need to show its reasons are "legitimate" in order to counter the FTC's claims.

The FTC has the burden to prove that Amazon is not just a big market player with power but also that it has taken illegal steps to acquire or maintain its dominance. The agency also must define and prove the relevant markets, a key threshold issue.

The outcome of this case could have far-reaching implications for the tech industry and could potentially reshape the landscape of e-commerce. As such, it is being closely watched by legal experts, industry stakeholders, and consumers alike.