Amazon is FTC’s New “Prime” Suspect

Amanda Meyer Associate Editor Loyola University Chicago School of Law, JD ‘25   The Federal Trade Commission (FTC) and 17 state attorneys brought a lawsuit against Amazon on September 26, 2023 claiming that Amazon is engaging in illegal activities to solidify their monopolistic grip on the online retail marketplace. Amazon is one of the world’s largest online retailers. The online marketplace giant started off as a bookseller, and quickly expanded its business to include a wide variety of other products and services. Amazon now owns over 40 subsidiaries and brands, such as Whole Foods, Audible, and the gaming platform, Twitch. The company is worth over $1.105 trillion and has 300 million global active users. The lawsuit The FTC has brought a lawsuit against Amazon alleging that the world’s largest online retailer has engaged in illegal activity to maintain a monopoly. The FTC states they are not bringing the suit because of Amazon’s size, but due to their exclusionary conduct that locks out competitors and prevents those competitors from growing. The FTC’s complaint states that Amazon has used punitive and coercive methods to maintain their power over the online retail industry. The FTC lists tactics that Amazon has engaged in to warrant a lawsuit, and these tactics include:

  • Anti-discounting measures punishing sellers and preventing competitors from offering lower prices than Amazon by burying them so far down in Amazon’s search results that no customer can find and purchase that competitor’s product.
  • Making it a necessity for sellers to obtain Amazon Prime eligibility for their products, making it more expensive for sellers on Amazon to offer their products on other websites, limiting competitors’ abilities to compete against Amazon.
  • Charging fees on the thousands of sellers whose only option to stay in business is to use Amazon. These fees range from a monthly fee for each item sold, to advertising fees that make it necessary for sellers to conduct business on Amazon. These fees force sellers to pay up to 50% of their total revenue to Amazon.

The FTC claims that Amazon’s tactics have also hurt consumers and their experiences on the online retailer’s website. Examples of this include:

  • Replacing relevant search results with paid-advertisements and deliberately increasing junk ads that worsen search quality.
  • Changing the search results to favor Amazon’s products over higher quality products.
  • Increasing prices on items consumers purchase, while preventing lower-priced items from being visible.

The FTC, along with state attorneys from Connecticut, Delaware, Maine, Minnesota, New York, and 12 other states are seeking a permanent injunction in the Western District of Washinton that would prohibit Amazon from engaging in monopolistic activity. Amazon’s response In a response to the FTC’s lawsuit, Amazon published an article claiming that the “misguided” lawsuit would “lead to higher prices, slower deliveries and hurt businesses.” Amazon argued that the case is “wrong on the facts and the law.” The online retail giant has claimed that they help businesses thrive and that the FTC is “radically departing from their anti-competitive approach.” Amazon lists the ways in which they help businesses and consumers. Some of these ways include, but are not limited to:

  • Including third-party sellers to provide business for those sellers and a wider variety of items for consumers.
  • Providing the Fulfillment by Amazon (FBA) service, which is an optional service for sellers to allow Amazon to handle product storage, packaging, shipping, returns and customer service.
  • Innovating Amazon Prime to make it better and faster for customers.

Amazon’s reaction to the FTC’s lawsuit and their ensuing article shows that they are scrambling to deflect and deny the allegations set forth in the FTC’s complaint and puts up a weak attempt at pointing the finger back at the FTC, claiming that the regulatory agency is harming businesses by bringing the lawsuit. Amazon’s argument that shipping will be slowed, and businesses will be hurt sounds more like a thinly veiled threat than a likely consequence to the FTC’s lawsuit. Next steps A major question is whether Amazon will be broken up as a result of the lawsuit. The FTC has answered, saying that breaking up Amazon is premature, and that the lawsuit only focuses on liability of the company and potentially its executives. Retailers and consumers do not have to worry about any changes to Amazon any time soon. A 10-day non-jury trial for this case is scheduled for early 2025, and the court’s final judgment will not be for another few years. In the meantime, Amazon can hopefully work on engaging in competitive practices without being accused of breaking the law.