The US government and 17 states are suing Amazon in a historic monopoly case

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

The groundbreaking lawsuit filed by the FTC and 17 attorneys general represents the government’s fiercest attack yet against Amazon, a company that started out selling books online but has since become known as the “everything store,” and has expanded into selling a wide range of books. . consumer products, creating a global logistics network, and becoming a force in other technologies such as cloud computing.

It is 172 pages long complaint Amazon claims it 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 harmed competition by requiring sellers on its platform to purchase Amazon’s in-house logistics services in order to secure best seller benefits, referred to as “prime” eligibility. It also alleges that the company is uncompetitively forcing sellers to list their products on Amazon at the lowest prices anywhere on the web, rather than allowing sellers to list their products on competing marketplaces at a lower price.

The 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 no choice 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 higher in marketplace search results than those sold by third parties, the FTC said.

Amazon is “squarely focused on preventing anyone else from getting the same critical mass of customers,” FTC Chairwoman Lina Khan told reporters on Tuesday. “This complaint reflects the latest and best thinking about how competition occurs in digital markets and, similarly, the tactics Amazon has used to stifle competitors, deprive them of oxygen, and leave a stunted landscape in its wake.”

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

The complaint was filed in the U.S. District Court for the Western District of Washington, and seeks a court order prohibiting Amazon from engaging in the alleged anti-competitive conduct.

The FTC is not ruling out the possibility of an Amazon breakup — nor the possibility of naming individual executives in the landmark antitrust case against the e-commerce giant, according to Khan.

Speaking on Tuesday just hours after the lawsuit was filed, Khan declined to say that the FTC would specifically seek to break up the company as a remedy for Amazon’s alleged illegal monopoly.

“At this point, the complaint really focuses on the issue of liability,” Khan said at the event hosted by Bloomberg News in Washington.

But the agency’s complaint, filed in federal court in Seattle, notes that any court order to address the issue could include “structural relief,” a legal term referring to the potential breakup of Amazon.

Asked about the request, Khan said the FTC is broadly interested in any relief that could effectively stop Amazon’s alleged anti-competitive behavior.

“Ultimately, you will need to ensure that any remedy stops the illegal behavior, prevents it from recurring, and ensures that Amazon cannot profit from and benefit from its illegal behavior,” Khan said Tuesday afternoon. “When we get to the question of treatment, these will be the principles we will focus on.”

Khan also left open the possibility that Amazon executives could be held personally liable if there was sufficient evidence that they were responsible for Amazon’s alleged illegal conduct.

“We want to make sure we’re bringing cases against the right defendants,” Khan said in response to a question from CNN about whether the FTC had considered naming specific executives in Tuesday’s case. “If we believe there is a basis for doing so, we will not hesitate to do so.”

The lawsuit makes Amazon the third tech giant after Google and Meta to be hit by widespread allegations from the US government that the company spent years violating federal antitrust laws, reflecting the growing hostility of policymakers around the world toward big tech companies that intensified after 2016. It may take The lawsuit takes years to be resolved. I play. But just as Amazon founder Jeff Bezos and his astonishing wealth have inspired critics to draw comparisons with America’s Gilded Age, the FTC’s lawsuit may come to symbolize a modern iteration of the antitrust crackdown of the early 20th century.

In a statement, Khan accused Amazon of using “punitive and coercive tactics” to maintain the illegal monopoly.

“Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them,” Khan said. “Today’s lawsuit seeks to hold Amazon accountable for these monopolistic practices and restore the lost promise of free and fair competition.”

“Today’s lawsuit makes clear that the FTC’s focus has radically moved away from its mission of protecting consumers and competition,” said David Zapolsky, Amazon’s senior vice president of global public policy and general counsel. He said Amazon’s practices helped drive competition, innovation and choice across the retail industry. He said Amazon promoted lower prices and faster delivery and helped small businesses sell their goods.

“If the FTC gets its way, the result will be fewer products to choose from, higher prices, slower deliveries to consumers, and fewer choices for small businesses — the opposite of what antitrust law is designed to do,” he said. “Today’s lawsuit by the FTC is wrong on both the facts and the law, and we look forward to litigating this case in court.”

Later Blog postZapolsky warned that the FTC lawsuit could not only force Amazon to list products at a higher price than competing marketplaces, but it could also raise Amazon’s costs of doing business — costs that might then be passed on to consumers in the form of subscription prices. Amazon Prime is higher or slower shipping times.

“We respect the role the FTC has historically played in protecting consumers and promoting competition,” the blog post said. “Unfortunately, the current Federal Trade Commission appears to be radically moving away from this approach, filing a misguided lawsuit against Amazon that would, if successful, force Amazon to engage in practices that actually harm consumers and the many businesses that sell in our store — such as having to display Higher prices, offering slower or less reliable Prime shipping, and making Prime more expensive and less convenient.

For years, Amazon’s critics, including U.S. lawmakers, European regulators, third-party sellers, consumer advocacy groups and others, have accused the company of everything from mistreating its workers to coercing its employees. Third Party Sellers Accepting anti-competitive conditions. Opponents said Amazon unfairly used sellers’ commerce data against them so it could figure out which products Amazon should sell itself. Many Amazon critics have said that the fact that Amazon competes with sellers in the same market it controls represents a conflict of interest that should be considered illegal.

But the FTC’s lawsuit filed on Tuesday was more focused, targeting Amazon’s conduct in two specific markets: the “online supermarket” market, where its conduct allegedly harmed shoppers; and an “Online Marketplace Services” marketplace that serves independent sellers. John Newman, deputy director of the FTC’s Bureau of Competition, said Amazon’s intentional self-favoring of its products in search results is a result of the fundamental anticompetitive conduct at issue in this case.

The lawsuit represents a watershed moment in Khan’s career. She is widely credited with initiating antitrust scrutiny of Amazon in the US with a seminal legal paper in 2017. She later helped lead a congressional investigation into alleged competition abuses in the tech industry. Details in a 450-page report How Amazon – as well as Apple, Google and Meta – enjoys “monopoly power” and that there is “significant evidence” showing that anti-competitive corporate behavior has stifled innovation, reduced consumer choice and weakened democracy.

The investigation led to a host of legislative proposals aimed at reining in the companies, but the most important of them faltered under a barrage of industry pressure and decisions by congressional leaders not to bring the bills to a final vote.

Lawmakers’ inaction has left it up to antitrust enforcers to police the tech industry’s alleged harm to competition. In 2021, President Joe Biden surprised many in Washington when he appointed Khan not only to serve on the FTC but to lead the agency, sending a signal that he supports tough antitrust oversight.

Since then, Khan has taken a tough stance on law enforcement, especially toward the technology industry. Under her supervision, the Federal Trade Commission has sued to block several technology acquisitions, most notably Microsoft’s $69 billion deal to acquire video game publisher Activision Blizzard. It has moved to restrict how companies collect and use consumers’ personal information, and warned them of the dangers of generative artificial intelligence.

All the while, the FTC scrutinized Amazon – Sue the company in June for allegedly tricking millions of consumers into subscribing to Amazon Prime and getting access Millions of dollars in settlements in May with the company over alleged privacy violations linked to Amazon’s smart home devices.

But the latest lawsuit against Amazon may rank as the most significant of all, because it gets to the heart of Amazon’s e-commerce business and focuses on some of the company’s most pressing criticisms.

In a heavily redacted portion of their lawsuit against the FTC, the agency’s lawyers vaguely described Project NESI, an “algorithm” and “pricing system” that allegedly “extracted” an undisclosed amount of value “from American households.” It’s unclear what Project Nessie is or how it works, but the FTC alleges in the complaint that the company’s software “belies its public claim that it seeks…[s] To be the most customer-focused company on earth. Amazon did not immediately respond to CNN’s questions about the Nessie project.

In a sign of how much of a threat Amazon views Khan’s rise, the company in 2021 called for her to step down from all cases related to the tech giant.

Khan has resisted those calls. In comments to reporters this week, Khan sidestepped questions about her past work at Amazon, praising the efforts of FTC staff in completing the agency’s investigation. The Federal Trade Commission said Tuesday it had taken a unanimous 3-0 vote to allow the lawsuit to proceed; Khan was among those who voted to move forward.