Amazon Responds To FTC Lawsuit Alleging It Inflates Prices, Overcharges Sellers
The Federal Trade Commission (FTC) and 17 state attorney generals are taking a big swing at Amazon with a 172-page lawsuit alleging an "ongoing pattern of illegal conduct" to block competition. According to the lawsuit, Amazon's list of infractions includes things like inflating prices and putting the squeeze on sellers with exorbitant fees, among other "unfair strategies to illegally maintain its monopoly power."
In a press release announcing the lawsuit, the FTC insists it's not suing Amazon simply because it's a big outfit—Amazon's market cap sits at $1.29 trillion at the time of this writing—but for what it has deemed to be "exclusionary conduct" to both prevent new competitors from emerging, and hinder existing ones from growing.
"Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies," FTC Chair Lina M. Khan said in a statement. "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."
According to the lawsuit, one example of Amazon's anticompetitive behavior is burying discounted sellers in search results so they become effectively invisible. The FTC also accuses Amazon of coercing sellers into obtaining Prime eligibility for their products, which makes it substantially more expensive for sellers to hawk their goods on other platforms.
Amazon's search algorithm is a key piece of the suit, and something that has come under scrutiny before. The FTC alleges that Amazon deliberately increases "junk ads" by replacing relevant and organic results with paid advertisements, ultimate "degrading the customer experience." It further accuses Amazon of biasing its own products "over ones that Amazon knows are of better quality."
"Amazon has hiked so steeply the fees it charges that it now reportedly takes close to half of every dollar from the typical seller that uses Amazon's fulfillment service," the lawsuit states.
Naturally, Amazon disagrees with the FTC's assessment. In response to the lawsuit, Amazon essentially accused the FTC "radically" losing sight of why it exists in the first place. Here's the statement in full...
"The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store. 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 filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court.” - David Zapolosky, Senior Vice President, Global Public Policy and General Counsel.
Amazon also posted a rundown of how the FTC's "misguided lawsuit" would, if successful, hurt businesses and lead to both higher prices and slower delivery times for consumers. According to Amazon, the lawsuit exhibits a "fundamental misunderstanding of retail."
Check out the FTC's lawsuit (PDF) and Amazon's response in full and let us know what you think in the comments section below.
