US Government, States File Lawsuit Against Amazon for Monopolistic Practices
US Government, States File Lawsuit Against Amazon for Monopolistic Practices

By Naveen Athrappully

The U.S. government, along with 17 states, is suing e-commerce behemoth Amazon for maintaining an alleged monopoly which they claim has resulted in lower product quality and inflated prices.

The Federal Trade Commission (FTC), on behalf of the government, alleges that Amazon’s initiatives prevent rivals as well as sellers on its platform from lowering product prices, degrades overall quality for customers, overcharges sellers, suppresses competition, and prevents rival companies from fair competition.

By stifling competition, “Amazon ensures that no current or future rival can threaten its dominance,” said the FTC in a Sept. 26 press release. “Amazon’s far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch hundreds of thousands of products sold by businesses big and small and affect over a hundred million shoppers.”

With a focus on anti-competitive practices, John Newman, Deputy Director of the FTC’s Bureau of Competition, said, “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”

Founded by Jeff Bezos, Amazon started online sales in 1995 through selling books. From there, it has expanded to selling almost everything and becoming the biggest e-commerce platform on the planet.

The 172-page complaint (pdf) alleges that the company has seized near-total control of the online retail economy and has exploited “its monopolies in ways that enrich Amazon but harm its customer.”

Amazon has hiked its fees so steeply that “it now reportedly takes close to half of every dollar from the typical seller that uses Amazon’s fulfillment service.”

According to the filing, sellers allege that “it has become more difficult over time to be profitable on Amazon” due to the company’s tactics. The partially-redacted complaint states one seller complaining that “we have nowhere else to go and Amazon knows it.”

Corporate Response

In an emailed statement to The Epoch Times, David Zapolsky, Amazon senior vice president of Global Public Policy and General Counsel, said: “Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition. The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store.

“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. 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.”

The states involved in the lawsuit are: Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.

Complaint Details

The FTC and states allege that Amazon’s monopolistic practices are prevalent in two markets—the online retail platform and the marketplace services section used by sellers.

Amazon threatens to essentially shadow-ban sellers if they’re found to be selling their products at a cheaper price anywhere “across the internet,” said the lawsuit.

“Conditioning sellers’ ability to obtain ‘Prime’ eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon,” according to a press release from the Michigan AG.

The corporation “degrades” customer experience by “replacing relevant, organic search results with paid advertisements.” Furthermore, through tweaking search results, Amazon promotes its own branded products over other ones “that Amazon knows are of better quality.”

The company is also accused of charging high fees on the hundreds of thousands of sellers. The sellers have “no choice” but to go along with Amazon regulations, claims the agency.

“These fees range from a monthly fee sellers must pay for each item sold, to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon.

“These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon.”

FTC Versus Amazon

This isn’t the first time that the FTC has taken action against Amazon this year. In June, the agency accused Amazon of enrolling consumers in its Amazon Prime service without gaining their consent and then “sabotaging their attempts to cancel.”

The FTC alleged that the primary aim of Amazon Prime’s cancellation process was not to enable its subscribers to cancel the service, but instead to “stop them,” according to a June 21 press release. The agency claimed that company leadership slowed down or rejected changes that would have enabled users to easily cancel the service.

“Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money,” said FTC Chair Lina M. Khan.

“These manipulative tactics harm consumers and law-abiding businesses alike. The FTC will continue to vigorously protect Americans from ‘dark patterns’ and other unfair or deceptive practices in digital markets.”

The FTC filed a lawsuit against Amazon on the issue.

Earlier in May, the FTC and the U.S. Department of Justice (DOJ) charged Amazon with violating children’s privacy laws by keeping their voice recordings “forever” while also undermining deletion requests made by parents.

Amazon had “prominently and repeatedly assured” its users, including parents, that they could delete voice recordings collected from the Alexa voice assistant and the geolocation information collected via the Alexa app, according to a May 31 FTC press release.

However, the company kept some of this information for years “and used the data it unlawfully retained to help improve its Alexa algorithm,” the FTC said.

“Amazon’s history of misleading parents, keeping children’s recordings indefinitely, and flouting parents’ deletion requests violated COPPA and sacrificed privacy for profits,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. COPPA refers to the Children’s Online Privacy Protection Act Rule (COPPA Rule).

“COPPA does not allow companies to keep children’s data forever for any reason, and certainly not to train their algorithms”

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