CNN –
The U.S. government and 17 states are suing Amazon in a landmark monopoly case that reflects years of allegations that the e-commerce giant abused its economic dominance and undermined fair competition.
The landmark lawsuit by the Federal Trade Commission and 17 state attorneys general represents the government’s sharpest attack yet against Amazon, a company that started out selling books online but is now known as a “do-it-all” store that specializes in… Selling a wide range of books specializing in consumer goods, creating a global logistics network and becoming a pioneer in other technologies such as cloud computing.
The 172-page complaint accuses Amazon of promoting its own platform and services at the expense of third-party sellers who rely on the company’s e-commerce marketplace for sales.
For example, according to the FTC, Amazon harmed competition by requiring sellers on its platform to purchase Amazon’s in-house logistics services in order to secure best-seller benefits known as “Prime” eligibility. It also alleges that the company anticompetitively forces sellers to offer their products on Amazon at the lowest prices on the Internet, rather than allowing sellers to offer their products at a lower price on competing marketplaces.
This practice is already the subject of a separate lawsuit against Amazon filed by California’s attorney general last year.
Because of Amazon’s dominance in e-commerce, sellers have little choice but to accept Amazon’s terms, the FTC claims, resulting in higher prices for consumers and a poorer consumer experience. According to the FTC, Amazon also ranks its own products higher in marketplace search results than those sold by third-party sellers.
Amazon is “focused solely on preventing anyone else from reaching the same critical mass of customers,” FTC Chairwoman Lina Khan told reporters on Tuesday. “This complaint reflects the latest and greatest thinking about how competition occurs in digital markets, as well as the tactics Amazon has used to stifle competitors, depriving them of oxygen and leaving a truly stunted landscape.”
The states involved in the case are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island and Wisconsin.
The lawsuit was filed in the U.S. District Court for the Western District of Washington and seeks a court order preventing Amazon from engaging in the alleged anti-competitive behavior.
According to Khan, the FTC is not ruling out a possible breakup of Amazon – nor the possibility that individual executives will be named in a landmark antitrust case against the e-commerce giant.
Speaking Tuesday, just hours after the lawsuit was filed, Khan declined to say that the FTC would specifically seek a breakup as a remedy for Amazon’s alleged illegal monopoly.
“At this point the complaint is really focused on the question of liability,” Khan said at the Bloomberg News event in Washington.
But the agency’s complaint, filed in federal court in Seattle, suggests that any court order to resolve the issue could include “structural relief,” a legal term that refers to a possible breakup of Amazon.
Asked about the request, Khan said the FTC is generally interested in any relief that can effectively stop Amazon’s alleged anti-competitive behavior.
“Ultimately, you want to ensure that any remedial action stops the illegal behavior, prevents a recurrence and ensures that Amazon is not able to profit from its illegal behavior,” Khan said Tuesday afternoon. “When we come to the question of remediation, we will focus on these principles.”
Khan also left open the possibility that Amazon executives could be held personally liable if there was sufficient evidence of their responsibility for Amazon’s allegedly unlawful conduct.
“We want to make sure we’re pursuing cases against the right defendants,” Khan said in response to a question from CNN about whether the FTC was considering naming specific executives in Tuesday’s case. “If we believe there is a basis for it, we will not hesitate to do so.”
The lawsuit makes Amazon the third technology giant after Google and Meta to be confronted with far-reaching allegations from the US government that the company has violated federal antitrust laws for years. This reflects the growing global hostility towards Big Tech among policymakers, which intensified after 2016. The legal battle could take years to play out. But just as Amazon founder Jeff Bezos and his spectacular wealth have inspired critics to draw comparisons to America’s Gilded Age, so the FTC lawsuit could come to symbolize a modern repeat of the antitrust crackdowns of the early 20th century.
In a press release, Khan accused Amazon of using “punitive and coercive tactics” to maintain an illegal monopoly.
“Amazon is now exploiting its monopoly power to enrich itself while raising prices and reducing service to the millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them. worsened,” Khan said. “Today’s lawsuit aims to hold Amazon accountable for these monopolistic practices and restore the lost promise of free and fair competition.”
“Today’s lawsuit makes clear that the FTC has radically departed from its mission to protect consumers and protect competition,” said David Zapolsky, senior vice president of global public policy and general counsel at Amazon. He said Amazon’s practices have helped spur competition, innovation and choice across the retail industry. He argued that Amazon promoted lower prices and faster deliveries and helped small businesses sell their goods.
“If the FTC were to impose its will, the result would be reduced product choice, higher prices, slower deliveries for consumers and limited options for small businesses — the opposite of what antitrust law is designed to achieve,” he said. “The lawsuit filed today by the FTC is factually and legally incorrect, and we look forward to taking this case to trial.”
In a subsequent blog post, Zapolsky warned that the FTC lawsuit could not only force Amazon to offer products at a higher price than on competing marketplaces, but also that it could increase Amazon’s costs of doing business – costs that are then passed on to Amazon could consumers in the form of higher Amazon Prime subscription prices or slower delivery times.
“We respect the role the FTC has historically played in protecting consumers and promoting competition,” the blog post said. “Unfortunately, it appears that the current FTC is radically departing from this approach and filing a misguided lawsuit against Amazon that, if successful, would force Amazon to engage in practices that are detrimental to consumers and the many companies that operate in ours “Selling the business actually does harm — like offering higher prices on food, offering slower or less reliable Prime shipping, and making Prime more expensive and less convenient.”
For years, critics of Amazon, including U.S. lawmakers, European regulators, third-party sellers, consumer groups and others, have accused the company of everything from mistreating its employees to forcing its third-party sellers to accept anticompetitive terms. According to opponents, Amazon unfairly used sellers’ own business data against them to determine which products Amazon itself should sell. And the fact that Amazon competes with sellers on the same marketplace it controls represents a conflict of interest that should be considered illegal, many Amazon critics said.
But Tuesday’s FTC lawsuit is narrower in scope and targets Amazon’s conduct in two specific markets: an “online superstore” market in which its conduct allegedly harmed shoppers; and an “online marketplace services” market serving independent sellers. Amazon’s deliberate prioritization of its own products in search results is a consequence of the underlying anticompetitive conduct at issue in this case, said John Newman, deputy director of the FTC’s Competition Bureau.
The lawsuit marks a turning point in Khan’s career. She is widely credited with launching antitrust scrutiny of Amazon in the United States with a groundbreaking legislative document in 2017. She later helped lead a congressional investigation into the tech industry’s alleged antitrust violations, detailing in a 450-page report how Amazon — and Apple, Google and Meta enjoy “monopoly power” and there is “substantial evidence” that that is the case Anti-competitive behavior by companies has hindered innovation, limited consumer choice and weakened democracy.
The investigation led to a series of legislative proposals aimed at reining in the companies, but the most significant of them stalled under a barrage of industry lobbying and decisions by congressional leaders not to put the bills forward for a final vote.
The legislature’s inaction has left antitrust regulators to monitor the tech industry’s alleged competitive harms. In 2021, President Joe Biden stunned many in Washington when he appointed Khan not only as a member of the FTC but also as the agency’s head, sending a signal that he supported strong antitrust oversight.
Since then, Khan has taken an aggressive enforcement stance, particularly toward the tech industry. Under its watch, the FTC has blocked numerous technology acquisitions, most notably Microsoft’s $69 billion deal to acquire video game maker Activision Blizzard. It has decided to limit the way companies can collect and use consumers’ personal data and warned them about the risks of generative artificial intelligence.
The FTC has consistently scrutinized Amazon – in June it sued the company for allegedly tricking millions of consumers into signing up for Amazon Prime and in May it reached a multimillion-dollar settlement with the company over alleged fraudulent actions Data breaches related to Amazon’s smart home devices.
But the latest lawsuit against Amazon may be the most significant of all, as it goes to the core of Amazon’s e-commerce business and focuses on some of the company’s most persistent criticisms.
In a heavily redacted portion of the FTC lawsuit, the agency’s lawyers cryptically described Project Nessie, an “algorithm” and “pricing system” that allegedly “extracted” an undisclosed amount of value from “American households.” It’s unclear what Project Nessie is or how it works, but the FTC claims in the complaint that the company’s program “refutes its public claim that it is ‘seeking.'[s] “To be the most customer-centric company in the world.” Amazon did not immediately respond to CNN’s questions about Project Nessie.
In a sign of how threatening Amazon viewed Khan’s rise, the company in 2021 demanded that she recuse herself from all cases involving the tech giant.
Khan has resisted these calls. And in remarks to reporters this week, Khan dodged questions about her previous work at Amazon and praised FTC staff’s efforts to complete the agency’s investigation. On Tuesday, the FTC announced that it had unanimously approved the lawsuit 3-0; Khan was among those who voted to proceed.