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Amazon sued by the FTC and 17 states in "landmark" monopoly case

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The US government and 17 states are suing Amazon in a landmark monopoly case reflecting years of allegations that the e-commerce giant abused its economic dominance and harmed fair competition.




The US government and 17 states are suing Amazon in a landmark monopoly case reflecting years of allegations that the e-commerce giant abused its economic dominance and harmed fair competition.


The groundbreaking lawsuit by the Federal Trade Commission and 17 attorneys general marks the government’s sharpest attack yet against Amazon, a company that started off selling books on the internet but has since become known as “the everything store,” expanding into selling a vast range of consumer products, creating a globe-spanning logistics network and becoming a powerhouse in other technologies such as cloud computing.


The 172-page complaint alleges Amazon unfairly promotes its own platform and services at the expense of third-party sellers who rely on the company’s e-commerce marketplace for distribution


For example, according to the FTC, Amazon has harmed competition by requiring sellers on its platform to purchase Amazon’s in-house logistics services in order to secure the best seller benefits, referred to as “Prime” eligibility. It also claims the company anticompetitively forces sellers to list their products on Amazon at the lowest prices anywhere on the web, instead of allowing sellers to offer their products at competing marketplaces for a lower price.


That practice is already the subject of a separate lawsuit targeting Amazon filed by California’s attorney general last year.


Because of Amazon’s dominance in e-commerce, sellers have little option but to accept Amazon’s terms, the FTC alleges, resulting in higher prices for consumers and a worse consumer experience. Amazon also ranks its own products in marketplace search results higher than those sold by third parties, the FTC said.





The complaint was filed in the US District Court for the Western District of Washington, and seeks a court order blocking Amazon from engaging in the allegedly anticompetitive behavior. Khan declined to say Tuesday whether the agency will be seeking a breakup of the company, saying the case is currently focused on proving Amazon’s liability under federal antitrust law.


The suit makes Amazon the third tech giant after Google and Meta to be hit with sweeping US government allegations that the company spent years violating federal antitrust laws, reflecting policymakers’ growing worldwide hostility toward Big Tech that intensified after 2016. The litigation could take years to play out. But just as Amazon founder Jeff Bezos and his spectacular wealth have inspired critics to draw comparisons to America’s Gilded Age, so may the FTC lawsuit come to symbolize a modern repeat of the antitrust crackdown of the early 20th century.





For years, Amazon’s critics including US lawmakers, European regulators, third-party sellers, consumer advocacy groups and more have accused the company of everything from mistreating its workers to forcing its third-party sellers to accept anticompetitive terms. Amazon has unfairly used sellers’ own commercial data against them, opponents have said, so it can figure out what products Amazon should sell itself. And the fact that Amazon competes with sellers on the very same marketplace it controls represents a conflict of interest that should be considered illegal, many of Amazon’s critics have said.


But Tuesday’s FTC suit is more narrowly focused, taking aim at Amazon’s behavior in two specific markets: an “online superstore” market, in which its conduct allegedly harmed shoppers; and an “online marketplace services” market serving independent sellers. Amazon’s deliberate self-preferencing of its own products in search results is an outgrowth of the underlying anticompetitive behavior at issue in the case, said John Newman, deputy director of the FTC’s competition bureau.





Throughout, the FTC has scrutinized Amazon — suing the company in June for allegedly tricking millions of consumers into signing up for Amazon Prime and reaching multimillion-dollar settlements in May with the company over alleged privacy violations linked to Amazon’s smart home devices.


But the latest suit against Amazon may rank as the most significant of all, because it drives at the heart of Amazon’s e-commerce business and focuses on some of the most persistent criticisms of the company.


In one heavily redacted portion of the FTC lawsuit, agency attorneys cryptically described Project Nessie, an “algorithm” and “pricing system” that has allegedly “extracted” an undisclosed amount of value “from American households.” It is unclear what Project Nessie is or how it works, but the FTC alleges in the complaint that the company’s program “belies its public claim that it ‘seek to be Earth’s most customer-centric company.’” Amazon didn’t immediately respond to CNN’s questions about Project Nessie.



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Just now, Kal-El814 said:

Amazon is gonna be all… that’s some nice data we’re holding onto for you. Be a real shame if anything happened to it, I’m just saying.


Clarence Thomas will make a totally coincidental appearance on one of Bezos' yachts.

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I feel like these cases largely succeed or fail based on their ability to define and substantiate the markets in question. Apple won their case against epic largely because the court didn't buy the idea that "iOS applications" was a distinct market from either phone or software applications in general.


Here the FTC is trying to define two markets where Amazon has monopoly power: "the online superstore market" and "the market for online marketplace services".


With the first, the FTC will need to sell the idea that "the online superstore market" is meaningfully distinct from retail as a whole and also from online shopping as a whole. Amazon loves to point out that online sales aren't even 20% of total retail. I think you can get a court to buy the idea that online shopping is distinct, and I think their arguments there are mostly good (starting at page 48), but I don't think it's a slam dunk. If they can't at least narrow the market down to online, the FTC loses instantly.


I think the separation of "online superstores" from the rest of e-commerce is a harder sell. A lot of their arguments are about ease of purchasing and inability to cross shop, and it's easy to imagine an Amazon lawyer walking through the process of searching on Google, getting different results from different stores, being able to purchase on most of them using an existing login (Amazon, Apple, Google), and basically pointing out all the ways that Amazon does directly compete with  "limited-selection stores" (the FTC's alternative to "superstores"). I think their best argument is their last one (page 54, point 159) where they point out that Amazon itself allows "limited-selection stores" to sell on Amazon, but Amazon won't let Wallmart or Ebay to. That shows that Amazon does treat them differently, which might be enough to convince the court to do the same.


If the government can't win that battle, it's bad, but not game over. Their numbers have Amazon at 60%-77% of the "online superstore market", but Amazon only has ~37% of all online retail. Being below 50% makes it a harder case to win, but I think you could still justify the idea that their market power is so outsized that they wield defacto monopoly status.





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Reading more of the complaint, I find it interesting that there isn't anything about Amazon ripping off their marketplace sellers. When I was in ecommerce years ago it was already well known, but it's really accelerated in recent years. Amazon having the data of what is selling, along with all pricing data, and being able to go and sell generic versions of those products is something a lot of people have pointed to as anti-competitive over the years.


This suit is almost entirely focused on Amazon effectively forcing sellers to use their logistics services (Fulfillment By Amazon or FBA). I think their arguments about that look very solid. I think Amazon would have a really hard time arguing that they treat non FBA sellers fairly. If the FTC can win on the market definitions, I feel like they've got an easy win.


I don't get the impression that this is really pushing for "structural relief" (i.e. breaking up Amazon). It seems like they could be forced to change some policies around FBA and some stuff around how they rank products on search, in addition to some probably hefty fines.

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