Image c/o AboutAmazon.com
By Tucker Long
On September 26, the Federal Trade Commission (FTC) filed a lawsuit against online shopping giant Amazon for illegal conduct that allows the website to wield monopoly power. The FTC lodged this complaint along with seventeen state attorney generals, alleging that Amazon unfairly uses its power as a digital marketplace to “inflate prices, degrade quality, and stifle innovation for consumers and businesses.”
Amazon is not being sued for its size or market share, rather the tactics the company uses to push out smaller sellers and promote its own merchandise, degrading the experience for not only the sellers but the customer as well. Amazon not only provides webspace for online retail, but they also sell their own merchandise, in direct competition with third-party sellers. According to a source on NPR, around 60% of products sold on the website come from sellers other than Amazon. Because Amazon is the largest online retailer, its actions can have strong effects throughout different online retail spaces. The FTC is alleging that if a third-party seller’s merchandise is selling at too low of a price point somewhere else on the internet, Amazon can bury that seller’s products on Amazon so far down in the search results that they lose significant traffic and relevancy. Sellers are not able to just up and leave Amazon because it is still the best way to sell products online, and because of this Amazon is keeping prices high across the internet. Furthermore, Amazon is able to add conditions to their “Prime” service for sellers that make it more difficult to sell elsewhere online. Services like Prime and their advertising service are costly and technically optional, though it is said that they are “virtually necessary for sellers to do business.” Because Amazon is so fundamental when it comes to the online retail industry, third-party sellers cannot just pivot and take their business elsewhere, rather it is still more lucrative to play by Amazon’s rules. The company is able to decrease revenue for their own sellers and make it so other online retailers cannot prosper, this is seen by the FTC as abuse of monopoly power.
On top of this, the FTC is claiming that Amazon promotes paid advertisements and Amazon’s own products above more relevant or better-reviewed ones, making the customers’ experience worse. In a report released on November 2, The Washington Post writes that according to newly released details from the lawsuit, Amazon executives, including founder Jeff Bezos, are instructing this kind of behavior. The suit is quoted as saying that “Amazon executives internally acknowledge this creates ‘harm to consumers’ by making it ‘almost impossible for high quality, helpful organic content to win over barely relevant sponsored content.’”
Amazon denies the allegations put forth by the FTC. In a statement put out on their website, the company says that while they “respect the role the FTC has historically played in protecting consumers and promoting competition.” They believe that their current iteration is “misguided”. If successful in their lawsuit, Amazon claims that the FTC will be forcing them “to engage in practices that actually harm consumers and the many businesses that sell in our store—such as having to feature higher prices, offer slower or less reliable Prime shipping, and make Prime more expensive and less convenient.” Amazon aims to bring low prices to customers and to help independent sellers be successful on their website, according to David Zapolsky, Amazon’s general counsel.
Currently, the FTC is trying to prove that Amazon broke the law, and if so, to put a stop to it. The outcome is still far from being determined, with FTC chair Lina Khan saying, “At this stage, the focus is really on liability.”
Madison Sciba '24,