Big tech antitrust crusade continues as U.S. sues Amazon

The United States has just chosen a new target in its ongoing campaign against the dominance of big tech, setting its sights on Amazon.com, Inc. The U.S. Federal Trade Commission (FTC) and 17 state attorneys general allege, in a lawsuit filed Tuesday, that Amazon has been using a “self-reinforcing cycle” of anticompetitive and unfair strategies to illegally maintain a monopoly in the online retail market. The highly redacted 172-page lawsuit claims Amazon harms, not just potential competition, but also sellers and shoppers on its own platform, by using anti-discounting tactics; making it virtually essential for sellers to use its Prime service while hiking the associated costs; and using “pay-to-play” advertisements that skew product search results. The government agency argues that Amazon limits price competition, “one of the most fundamental avenues of competition,” by punishing sellers who offer lower prices anywhere other than its storefront. “Amazon deploys a sophisticated surveillance network of web crawlers that constantly monitor the internet, searching for discounts that might threaten Amazon’s empire,” says the lawsuit. Sellers allegedly face a number of threats if those crawlers catch them selling a product at a lower price than its Amazon listing. For example, their “Buy Box” can be removed, which are the buttons that allow shoppers to quickly “Add to Cart” or “Buy Now.” While the exact percentage of Amazon sales made through the Buy Box is redacted from the court filing, e-commerce software company Helium 10 says it is over 90 per cent, and the FTC says Amazon internally recognizes that removing it causes a sellers’ sales to “tank.” The suit says discounting sellers are also buried “so far down in Amazon's search results that they become effectively invisible,” and sometimes face “the ultimate threat” of being exiled from Amazon’s marketplace entirely. The FTC claims Amazon has internally stated that sellers “live in constant fear” of these tactics. This has allowed Amazon to hike the fees it charges sellers, says the lawsuit, claiming it now takes almost half of all the revenue sellers make through its fulfillment service. “Amazon's one-two punch of seller punishments and high seller fees often forces sellers to use their inflated Amazon prices as a price floor everywhere else,” states the FTC, which it says “distorts basic market signals,” suppressing rival stores’ ability to compete and depriving shoppers of more affordable options. The online retailer pressures sellers into using its logistics service, Fulfillment by Amazon, if they wish to make their products eligible for Amazon Prime, even if they would prefer to use an alternative method, says the lawsuit. Although the amount of Prime sales made on Amazon are redacted from the document, the FTC makes it clear that the premium subscription service’s “enormous reach” is crucial for sellers. “According to public reports, Mr. Bezos told Amazon executives that Prime was created in 2005 to ‘draw a moat around best customers,’” writes the FTC. “In a competitive world,” it states, “Amazon's decision to raise prices and degrade services would create an opening for rivals and potential rivals to attract business, gain momentum, and grow. But Amazon has engaged in an unlawful monopolistic strategy to close off that possibility.” Amazon argues it has done nothing wrong, claiming the online retail market is actually very competitive and that, by lowering consumer prices, it has spurred competition in the industry. “ suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” said David Zapolsky, Amazon’s general counsel, in a written statement. “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.” Zapolsky continued, “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.” – Reporting by Phalen Tynes-MacDonald at pcreed@thewirereport.ca and editing by Jenna Cocullo at jcocullo@thewirereport.ca.

Big tech antitrust crusade continues as U.S. sues Amazon

News | September 27, 2023

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us

Big tech antitrust crusade continues as U.S. sues Amazon

News | September 27, 2023

Unlock all the Canadian telecom, broadcasting and digital media news you need.

FREE TRIAL

SUBSCRIBE

Related Stories

OPINION: More competition does not require new competitors

Competition Bureau suing Google for alleged anti-competitive ad practices

The Big Fix: Vass Bednar, Denise Hearn tackle competition in Canada in new book

Coordinated effort is ‘essential’ in tackling AI policy issues, says Canadian Digital Regulators Forum

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us