Amazon is being sued by the US Federal Trade Commission and 17 state attorneys general who allege that the online retail giant is using “anticompetitive and unfair strategies” to maintain a monopoly and drive up prices for buyers and sellers online.
“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,” the states and FTC alleged in a complaint Tuesday. “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.”
It is alleged that Amazon is affecting retail sales to the tune of hundreds of billions of dollars per year, across hundreds of thousands of products.
Amazon’s business practices affect both retail shoppers and online sellers, the complaint alleges, including by:
- Replacing the organic results of your product searches with paid advertisements.
- Placing Amazon’s own products nearer the top of your search results.
- Leveraging so many fees that sellers pay “close to 50% of their total revenues to Amazon.”
- Charging high fees for sellers to maintain Prime eligibility.
“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.
Amazon posted a lengthy response to the lawsuit online, calling it “misguided.” If the lawsuit is successful, Amazon says it may have to raise prices on the products being sold, offer slower and less reliable shipping, and charge customers more for Prime, its subscription service.
“It was our hope the agency would recognize that Amazon’s innovations and customer-centric focus have benefited American consumers through low prices and increased competition,” said Amazon General Counsel David Zapolsky.
“When setting prices for the products we sell ourselves, we try to match other retailers’ low prices — online and offline,” Zapolsky added. “All of the other businesses that sell in our store set their prices independently, but to help them increase sales and make our store more attractive to customers, we also invest in tools and education to help them offer competitive prices.
“Just like any store owner who wouldn’t want to promote a bad deal to their customers, we don’t highlight or promote offers that are not competitively priced.”
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 comes just weeks ahead of Amazon’s next big Prime Day event, Prime Big Deal Days, on Oct. 10-11. Amazon also held a device event last week where it highlighted the breadth of its own-brand product offerings, unveiling several new and refreshed devices, including the new Fire TV Soundbar, Fire TV Stick 4K Max, Echo Frames glasses and Eero Max 7 router.