FTC, 17 States Sue Amazon For Monopolizing 'Superstore' Market

Amazon illegally monopolizes the online “superstore” market, to the detriment of consumers as well as outside companies who sell products on the platform, the Federal Trade Commission and 17 states allege in a new lawsuit.

“This case is about the illegal course of exclusionary conduct Amazon deploys to block competition, stunt rivals' growth, and cement its dominance,” the FTC and state coalition claims in a 172-page complaint filed Tuesday in U.S. District Court for the Western District of Washington.

The complaint alleges that Amazon effectively prevents marketplace sellers from discounting their products on other sites, and requires sellers to use its fulfillment system in order to participate in Amazon Prime, which offers expedited shipping.

“Amazon deploys this interconnected strategy to block off every major avenue of competition -- including price, product selection, quality, and innovation -- in the relevant markets for online superstores and online marketplace services,” the complaint alleges.



The complaint characterizes online superstores as stores that “offer a single destination for shoppers to browse a large and diverse selection of goods from multiple brands across a wide range of categories.”

The FTC's claim that Amazon attempts to prevent retailers from offering discounts on other platforms has surfaced in other antitrust cases against the company -- including ones by attorneys general in California and Washington, D.C.  A trial judge dismissed the lawsuit brought in Washington, D.C., but the attorney general is appealing that decision.

The FTC and states also contend in the new lawsuit that Amazon used to prioritize organic results in response to searches, but now “litters its storefront with pay-to-play advertisements.”

“Most sellers must now pay for advertising to reach Amazon's massive base of online shoppers, while shoppers consequently face less relevant search results and are steered toward more expensive products,” the complaint alleges.

“In a competitive world, Amazon's decision to raise prices and degrade services would create an opening for rivals and potential rivals to attract business, gain momentum, and grow. But Amazon has engaged in an unlawful monopolistic strategy to close off that possibility,” the FTC and states add.

Amazon general counsel David Zapolsky stated Tuesday that the practices challenged in the complaint “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.”

Zapolsky added: “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.”

Several advocacy groups cheered news of the lawsuit. 

“Amazon’s dominance and ubiquity mask the harms it inflicts daily on consumers, workers, small business, and a fair economy,”  Robert Weissman, president of Public Citizen, stated.

“If you as a small business want to sell online, you have little choice but to sell through Amazon. But if you sell through Amazon, you do so at a disadvantage, subjected to fees and terms that benefit Amazon, diminish innovation, and force higher prices for consumers,” Weissman added.

But others, including the tech industry-funded policy group Chamber of Progress, criticized the new complaint.

“At a time when families need help, it’s really surprising that the FTC would try to break up a service that nearly half of all Americans use to make their lives easier,” Chamber of Progress founder and CEO Adam Kovacevich stated. “The FTC is targeting practices that Amazon’s competitors don’t like competing against -- like two-day shipping and low prices for consumers -- but which American families love.”

Earlier this year, the FTC alleged in a separate complaint that Amazon duped consumers into signing up for Prime subscriptions, and thwarted cancelation attempts. Amazon has denied those allegations and is contesting that matter in court.

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