Amazon Faces Major Antitrust Lawsuit From Federal and State Governments

Emma Grant

Portland, OR – The state of Oregon has joined 16 other states and the Federal Trade Commission in filing an antitrust lawsuit seeking to break up Amazon, the world’s largest online retailer.

The lawsuit alleges Amazon has violated antitrust laws by abusing its monopoly power over third-party sellers that rely on its marketplace platform.

Filed in the District of Columbia, the lawsuit asserts that Amazon illegally maintains its dominant position in the online retail market through practices that squeeze sellers and make it impossible for them to offer lower prices on other platforms.

The attorneys general argue this stifles competition and results in consumers paying inflated prices across the internet.

“What Amazon is accused of doing is essentially abusing and ripping off those small businesses, those third-party sellers that have to be on in order to reach the customers,” said Ron Knox, a senior researcher at the Institute for Local Self-Reliance, an advocacy group for local businesses. “It does that through these ever-increasing and often exorbitant fees that it charges.”

Amazon’s marketplace now accounts for over 60% of the company’s e-commerce volume. There are an estimated 1.9 million active third-party sellers on Amazon worldwide, along with 13.5 million seller products listed on the U.S. marketplace alone.

The tech giant prohibits third-party merchants from offering lower prices on other sites, forcing them to maintain higher prices across the internet. Merchants also face pressure to enroll in Amazon’s Fulfillment by Amazon shipping service, which further locks them into doing business on Amazon’s terms, the lawsuit contends.

Monopoly Power Over E-Commerce

The lawsuit argues that Amazon has monopoly power over U.S. online retail sales, with its market share reportedly larger than the combined share of its top four competitors.

Its Prime membership program, which provides free shipping and other benefits to over 200 million members globally, creates a powerful incentive for consumers to shop on Amazon over any other online marketplace.

“When you have half of online sales happening through Amazon’s website, it means small businesses have to play by Amazon’s rules if they want to reach potential customers,” said Knox. “What the FTC is saying is that Amazon, through its actions, is not letting other people compete.”

According to the suit, Amazon’s anticompetitive practices have made it nearly impossible for a new firm to enter the online retail space and offer consumers an innovative alternative to Amazon’s platform. The attorneys general assert this lack of competition results in consumers having no choice but to pay Amazon’s high fees and commissions.

“I think if the courts rule in favor of the FTC and the 17 states, consumers will see the difference when they see the lower prices and have different and innovative ways to ship their goods,” said Knox.

Amazon Pushes Back

In response to the lawsuit, Amazon said the FTC’s approach would harm consumers by forcing Amazon to raise prices and provide slower delivery times. A spokesperson said the company represents less than 4% of U.S. retail sales and has had success by innovating and offering great service, selection, and low prices.

“Similar to the other large technology platforms, Amazon shares many of the significant challenges facing internet-economy regulators,” said Chris Sagers, a professor of antitrust law at Cleveland State University. “But its scope uniquely reaches deeply into American life, and its behaviors have seemed uniquely aggressive.”

The retailer also argued that independent sellers have many other sales channels besides Amazon, evidenced by the fact that only about 10% of sellers earn more than $500,000 a year from its marketplace.

Previous government scrutiny of Amazon has focused on the massive amount of consumer data it accumulates. But the FTC suit centers on the company’s anti-competitive business practices that harm consumers by limiting choice, stifling innovation and keeping prices artificially high across e-commerce.

Longstanding Antitrust Issues

“This is a very straightforward application of antitrust laws which say you can’t have a monopoly and use illegal tactics to maintain or grow that monopoly power – you have to let other people compete,” Knox said.

The Institute for Local Self-Reliance published a report in May arguing that Amazon abuses its monopoly power by giving preferential treatment to its private-label brands and copying sellers’ products to compete against them.

Other critics have accused Amazon Web Services, its profitable cloud computing division, of anti-competitive behavior by limiting interoperability with competing services. That division is not part of the current lawsuit.

The retailer also faces scrutiny in the European Union, where antitrust regulators have charged Amazon with using data from independent sellers to unfairly compete against them with its own products. The company could face hefty fines or be forced to change its business practices.

Despite the pushback, legal experts say the lawsuit faces an uphill battle because current antitrust law focuses narrowly on consumer welfare in terms of prices and choice. Amazon provides low prices, wide selection and convenience, which could make the case difficult to prove.

But a ruling against Amazon has the potential to reshape antitrust policy and how competition is assessed in the internet age. Proponents argue that outdated legal frameworks have failed to restrain the monopolistic power of tech giants, opening the door to abuses.

“I think if the lower prices, new marketplaces and innovative shipping lead to a better marketplace overall, it will show that antitrust law is still relevant in the digital economy,” Knox concluded.

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Emma Grant is a highly regarded legal news expert with a deep understanding of constitutional law and its implications in contemporary society. With her extensive background in legal journalism and analysis, Emma Grant has established herself as a trusted authority on the intersection of law, policy, and society.