The complaint alleges that Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging. By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance. Amazon’s far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch hundreds of thousands of products sold by businesses big and small and affect over a hundred million shoppers.
“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, Deputy Director of the FTC’s Bureau of Competition. “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”
The FTC and states allege Amazon’s anticompetitive conduct occurs in two markets—the online superstore market that serves shoppers and the market for online marketplace services purchased by sellers. These tactics include:
- Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping prices higher for products across the internet. For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.
- Conditioning sellers’ ability to obtain “Prime” eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon.
- Degrading the customer experience by replacing relevant, organic search results with paid advertisements—and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase.
- Biasing Amazon’s search results to preference Amazon’s own products over ones that Amazon knows are of better quality.
- Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. These fees range from a monthly fee sellers must pay for each item sold, to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon. These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon.
Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin joined the Commission’s lawsuit. The Commission vote to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Western District of Washington was 3-0.
by Victoria Graham (media contact), FTC | Read more:
Image: Lina Khan, FTC
[ed. The spectacular Lina Khan at the FTC. This, the Google antitrust lawsuit, and the following post show how government oversight and accountability should actually work. Finally. A watershed moment. Monopolies are killing competitive business practices, pricing and innovation just so the rich and powerful can get a little (a lot!) more rich and... powerfuller. She'd better work fast though, because... well, we all know why. See also: Lina Khan vs. Jeff Bezos: This Is Big Tech’s Real Cage Match (NYT):
"Jeff Bezos made his fortune with one truly big idea: What if a retailer did everything possible to make customers happy?
His forcefully nurtured creation, Amazon, sold as many items as possible as cheaply as possible and delivered them as quickly as possible. The result is that $40 out of every $100 spent online in the United States goes to Amazon and Mr. Bezos is worth $150 billion.
Lina Khan made her reputation with a very different idea: What if pleasing the customer was not enough?
Low prices, she argued in a 95-page examination of Amazon in the Yale Law Journal, can mask behavior that stifles competition and undermines society. Published in 2017 while she was still a law student, it is already one of the most consequential academic papers of modern times.
These two very different philosophies, each pushed by an outsider unafraid of taking risks, at last have their much-anticipated confrontation."
"Jeff Bezos made his fortune with one truly big idea: What if a retailer did everything possible to make customers happy?
His forcefully nurtured creation, Amazon, sold as many items as possible as cheaply as possible and delivered them as quickly as possible. The result is that $40 out of every $100 spent online in the United States goes to Amazon and Mr. Bezos is worth $150 billion.
Lina Khan made her reputation with a very different idea: What if pleasing the customer was not enough?
Low prices, she argued in a 95-page examination of Amazon in the Yale Law Journal, can mask behavior that stifles competition and undermines society. Published in 2017 while she was still a law student, it is already one of the most consequential academic papers of modern times.
These two very different philosophies, each pushed by an outsider unafraid of taking risks, at last have their much-anticipated confrontation."
***
and, FTC Adds Senior Executives Who Played Key Roles in Prime Enrollment Scheme to Case Against Amazon (FTC):]
"The Federal Trade Commission has named three senior Amazon executives in an amended complaint in its case against the company for its years-long effort to enroll consumers into its Prime program without their consent while knowingly making it difficult for consumers to cancel their Prime subscriptions.
Named in the amended complaint are Neil Lindsay, who served as senior vice president overseeing Prime and now serves on the company’s overall leadership team; Russell Grandinetti, who also serves as a senior vice president overseeing Prime; and Jamil Ghani, a company vice president who oversees the Prime subscription program. (...)
The unredacted complaint’s allegations also revealed:
- Excerpts from an Amazon document that uses the term “misdirection” to refer to the company’s practice of forcing consumers to find a small blue text link to make a purchase without joining Prime, while using a far more prominent button saying “Get FREE Two-Day Shipping” that actually enrolls consumers in Prime.
- Information about tactics used by the company to force consumers into the complex Iliad cancellation flow, such as a company policy that required Amazon customer service employees to direct consumers who called to cancel Prime to the Iliad flow online, even though customer service agents had the ability to process the cancellation.
- Findings highlighted in a company newsletter that said, “The issue of accidental Prime-sign ups is well documented” and acknowledging that Prime customers “sign[] up accidentally and/or [don't] see auto-renewal terms.”
- Statements from Amazon employees acknowledging the company’s use of user flows “designed to mislead or trick users to make them do something they don’t want to do, like signing up for a recurring bill.” Amazon employees began raising this issue for company leaders, who refused to take action, as early as 2016.
- Details about Amazon’s attempts to delay and hinder the FTC’s investigation of these issues, including attempting to apply legal privilege to documents that were not privileged and concealing the existence of other relevant, damaging documents."
***
Finally, see also: Amazon Is the Apex Predator of Our Platform Era (NYT):"In its early years, Amazon was good to its users. It sold products affordably, and shipped them swiftly and reliably. It attended closely to the authenticity of the reviews that appeared on its site and operated an “honest search” that populated results pages with the best matches for each query.
Then Amazon started locking everyone in. Through Prime, it presold customers a year’s worth of shipping. With its digital publishing ventures, it nudged customers toward subscriptions, building a captive base of readers and deploying technology and expansive readings of obscure copyright laws to stop them from moving their books to other platforms. It opened Prime shipping at a low rate to its suppliers, relieving businesses of messy fulfillment logistics.
Meanwhile, its heavy subsidies, made possible by its investors’ appetite for backing an incipient monopoly, made it increasingly difficult for rival retail sites to gain traction, because Amazon’s seemingly bottomless coffers meant that it could sell goods below cost and extinguish any upstart that dared to compete with it. This created another form of lock-in for Amazon: It became progressively harder not to shop there.
The more locked in we were, the less Amazon needed to offer us. The customer-friendly, honest search degraded as the company began to allow retailers to buy their way to the top of listings, and by 2021, ads generated $31 billion in revenue. As sellers became increasingly reliant upon Amazon to display and deliver their goods, the company was free to drain money from them, too, piling fee upon fee and reportedly copying best-selling products.
Now we are at the final stage of monopolistic decay. The nation’s dominant online retail marketplace not only claws away much of its sellers’ revenues but also now penalizes them if they sell their products for lower prices at other retail outlets (including at its archrivals Target and Walmart). Amazon gets the American consumer coming and going, providing worse goods at higher prices while receiving vast sums in subsidies from state and local governments.
Speaking for his landmark antitrust bill of 1890, Senator John Sherman said: “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade.”
This suspicion of corporate power died in the Reagan era, when regulators adopted a new posture grounded in the idea that monopolies were evidence of efficiency and should be nurtured, and that “consumer welfare” in the form of low prices was an absolute good of antitrust law. Amazon is surely the king of our time. Our antitrust laws were fashioned specifically to guard against this overwhelming corporate power — both its accumulation and its abuse."
Speaking for his landmark antitrust bill of 1890, Senator John Sherman said: “If we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade.”
This suspicion of corporate power died in the Reagan era, when regulators adopted a new posture grounded in the idea that monopolies were evidence of efficiency and should be nurtured, and that “consumer welfare” in the form of low prices was an absolute good of antitrust law. Amazon is surely the king of our time. Our antitrust laws were fashioned specifically to guard against this overwhelming corporate power — both its accumulation and its abuse."
[ed. Actually, one more Final note: does anyone actually get two-day Prime shipping anymore? I know I don't.]
