WASHINGTON (CN) — The Federal Trade Commission and 17 state attorneys general sued Amazon on Tuesday, accusing it of forming monopolies and hiking prices for shoppers, and seeking to reign in the tech giant’s power.
“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” FTC Chair Lina Khan said in a press release. “Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”
Amazon is the second-largest private employer in the United States. On top of its online retail business, the company has expanded into myriad industries, including health care, food and movies. In recent years, the company has purchased Whole Foods, MGM and One Medical.
David Zapolsky, Amazon’s senior vice president of global public policy and general counsel, said the lawsuit means the FTC has “radically departed from its mission of protecting consumers and competition.”
He said the challenged actions drive competition and innovation.
“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,” Zapolsky said in a statement. “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.”
In the antitrust lawsuit filed in U.S. District Court for the Western District of Washington, the government stops short of seeking to break up Amazon, but it accuses the company of using “a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power.”
Amazon stifles competition, overcharges sellers and degrades quality for shoppers through actions that affect a massive portion of the online economy, said John Newman, deputy director of the FTC’s Bureau of Competition.
“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,” Newman said in a press release. “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 lawsuit accuses Amazon of anticompetitive conduct in its online market serving shoppers and its marketplace where sellers purchase services.
For sellers, the FTC claims Amazon suppresses listings for lower-priced goods so they “become effectively invisible.”
The federal and state authorities filing suit also say the company requires sellers to use Amazon’s fulfillment service to qualify for Prime eligibility, which regulators say is a necessity for conducting business on the site. The requirement makes it “substantially more expensive” for sellers to use other platforms.
Combined with other fees, sellers could be forced to pay close to 50% of their revenue to Amazon, according to the lawsuit.
Shoppers pay their own price in turn, the suit says, as searches are biased toward favoring Amazon’s products over others that might be of better quality. Searches also replace organic results with paid advertisements.
The FTC is joined in the lawsuit by Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island and Wisconsin.Follow @TheNolanStout
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