On September 26, 2023 the Federal Trade Commission (FTC) and 17 states filed suit against Amazon in the Western District of Washington, alleging the tech giant uses anticompetitive practices to maintain its monopoly power in its online supermarket store and marketplace services. The FTC seeks a permanent injunction to prohibit Amazon from continuing its alleged “punitive and coercive tactics.”
The FTC alleges Amazon engages in exclusionary conduct that both hinders the ability of competitors to meaningfully compete on Amazon’s platform, and inflates online prices for consumers. Amazon owns its marketplace platform, sells its products on its platform in competition with other online sellers, and controls the fulfillment, shipping, and delivery network that sellers and customers are incentivized to use. As alleged by the FTC, Amazon (among other things) punishes companies that discount their products on other platforms by burying those sellers in its search results, coerces sellers to obtain “Prime” eligibility for their products and use Amazon’s higher-cost delivery network, biases search results to preference Amazon’s own products, and charges unreasonable fees to hundreds of thousands of third-party sellers.
This highly anticipated lawsuit comes after four years of the FTC’s investigations into Amazon and its business practices, including practices not directly raising competition issues. This year, Amazon has paid the agency more than $30 million to settle two lawsuits related to consumer protection issues such as its alleged failure to delete children’s conversations with its voice assistant, Alexa, and its monitoring of customers’ Ring camera footage without consent. Additionally, in June, the FTC filed another suit against Amazon alleging the company tricked consumers into signing up for Prime and deliberately made it difficult to cancel the service.
Stakes are high for the FTC as well. The agency has been heavily criticized for a number of high-profile losses in cases alleging new or rarely invoked legal theories of liability, and for Chair Lina Khan’s refusal to recuse herself from the agency’s investigations into Amazon after she wrote a paper while in law school in 2017 calling for Amazon’s breakup on antitrust grounds. In the case filed this week, the FTC can expect to face arguments from Amazon that lean on decades of case law generally giving monopolists wide latitude to set the terms on which they will deal with other actors, and on the Supreme Court’s 2018 decision requiring plaintiffs to allege and prove anticompetitive effects in both sides of a “two-sided” platform market – merchants and customers – for monopolization to occur under § 2 of the Sherman Act. The plaintiff States will face the same hurdles, as most States’ antitrust laws are interpreted in line with federal precedent. Because the FTC alleges violations of § 5 of the FTC Act as well as of the Sherman Act, this case may prove to be an important litmus test for how receptive courts may be to the FTC’s announced intention to bring cases under § 5 for conduct that may not meet all of the elements of a monopolization claim.