From The Federal Trade Commission:
September 26, 2023
The Federal Trade Commission and 17 state attorneys general today sued Amazon.com, Inc. alleging that the online retail and technology company is a monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power. The FTC and its state partners say Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.
The complaint alleges that Amazon violates the law not because it is big, but because it engages in a course of exclusionary conduct that prevents current competitors from growing and new competitors from emerging. By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance. 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.
“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said FTC Chair Lina M. Khan. “The complaint sets forth detailed allegations noting how 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. Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”
“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, Deputy Director of the FTC’s Bureau of Competition. “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”
The FTC and states allege Amazon’s anticompetitive conduct occurs in two markets—the online superstore market that serves shoppers and the market for online marketplace services purchased by sellers. These tactics include:
- Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping prices higher for products across the internet. For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.
- 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.
Amazon’s illegal, exclusionary conduct makes it impossible for competitors to gain a foothold. With its amassed power across both the online superstore market and online marketplace services market, Amazon extracts enormous monopoly rents from everyone within its reach. This includes:
- Degrading the customer experience by replacing relevant, organic search results with paid advertisements—and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase.
- Biasing Amazon’s search results to preference Amazon’s own products over ones that Amazon knows are of better quality.
- Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. 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.
The FTC, along with its state partners, are seeking a permanent injunction in federal court that would prohibit Amazon from engaging in its unlawful conduct and pry loose Amazon’s monopolistic control to restore competition.
Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin joined the Commission’s lawsuit. The Commission vote to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Western District of Washington was 3-0.
Link to the rest at The Federal Trade Commission
PG has posted about this matter previously. When this complaint was originally filed, the public consensus from independent antitrust attorneys was that the FTC was unlikely to succeed.
A ruling that “Most Favored Nation” clauses are illegal for monopoly or near monopoly companies to include in their contracts would be a major change to ‘business as usual’ to many industries.
I think the MFN clauses and the exclusivity requirements (for Kindle Unlimited and similar) are the places where Amazon is on questionable ground.
Some would argue that MFN clauses in contracts are aligned with the Robinson-Patman Act. 😉
https://en.m.wikipedia.org/wiki/Robinson%E2%80%93Patman_Act
sort of, they only go one way (nobody can sell cheaper than Amazon, but Amazon can sell cheaper than others, or get a bigger discount)
the problem with Amazon’s version of MFN is that it’s based on the retail price, not the wholesale price.
If it was that you had to offer to have Amazon pay you the same amount for your book as any other site, that would be reasonable. But demanding that no other site can sell it for a lower retail price is a different story.
This is wrapped up in the problems with the consignment model being used instead of wholesale/retail.
If you’re thinking books, Amazon doesn’t get different terms than the standalone bookstores; they deal with different suppliers. Amazon buys non-returnable books from the publisher, bookstores buy returnable books from Ingram.
In other product lines, Amazon similarly offers a set of features different from its closest competitors so demanding different terms is not automatically unreasonable.
And focusing on retail pricing is also a dubious (and often dated) proposition. Amazon isn’t always cheapest and Prime isn’t free so its cost needs to be factored in. Plus, in many cases Amazon makes their sales on convenience and depth of inventory instead of price.
Recent anecdote:
My mother’s plastic pill organizer has been fraying (it was gift from one of my cousins) and a replacement was going to be needed. I could have bounced around town looking for a pharmacy with a suitable replacement. Or, I could take out the tablet, go to Amazon, and search for “pill organizer”:
https://www.amazon.com/s?k=pill+organizer&rh=p_85%3A2470955011&dc&crid=2UQW92YO4ECZH&qid=1713571233&rnid=2470954011&sprefix=pill+%2Caps%2C411&ref=sr_nr_p_85_1&ds=v1%3A4ccPbPnY0cLyEY3258jTsZmKT4MZ3%2FQafgzL5Q27OJE
I didn’t go for the cheapest but for the one best suited for the mission: large, color coded, with time of day preprinted, and customization labels included.
5 minutes to find and order, a couple days to get. And with free shipping.
Convenience.
Amazon *is* skirting the law in several areas (look at what the EU is investigating) and they have substantial market power in several areas where network effects an first mover primacy give them a leg up on competitors (look at the UK fretting over AWS and AZURE running rings around Google and latecomer startups), but nobody but the clueless FTC is whining over MFN and pricing.
Out of all the issues they might be going after (AUDIBLE!) they chose the hardest cases to make? “Stupid is as stupid does.”
FWIW, I chose this one for its size, biggest compartments:
https://www.amazon.com/VMVN-Organizers-Container-Medicine-Organizer%EF%BC%8CRemovable/dp/B0B3CRQK1J/ref=sr_1_5_pp?crid=2UQW92YO4ECZH&dib=eyJ2IjoiMSJ9.pE4nYcb0ICppXOBV8Q6MFX0F_9mMfTJy5teSj1FW50hvyBxQJzQGw42ZavYgDi5xb6llVugbjNtL6AcCDP32Lc2b59VPLtsFhCMbXHLaGRkcxwfJ_dnFYZh7_WpBqmDM5QxZvdwSTb_OtvZCgCup_VXwTQgTEFMKnRsK0AfiwoJP4Br_yi7I5nmVYBG6HGLcmMVSTH2hYq0nw5RPlC2whan5vWT__tX5kABJselaHiz5RlmeVdE0DVGjmRb5sDIp7p_neXb79UYAWXdt5F8q5TPapWVdq6tUoH_SRVjicSo.fGDqblfreZYEvCaSdaThcD0wiuPH7wiykVg6be_3_YI&dib_tag=se&keywords=pill+organizer&qid=1713572350&refinements=p_85%3A2470955011&rnid=2470954011&rps=1&sprefix=pill+%2Caps%2C411&sr=8-5
No B&M pharmacy is going to carry that broad an inventory..Not here, not in Manhttan, not anywhere.
Amazon did only first and still do it best.
Wannabes need to up their game.
with books, the problem is their MFN clause that prohibits the author/publisher from selling the book at a lower price anywhere else than the price they sell for on Amazon. The way they dealt with the publishers initially was fine (where they paid the publishers the wholesale price and then sold it at whatever price they wanted, including lower than the books sold for elsewhere). but the fact that a publisher or author isn’t allowed to put the book on sale elsewhere (as I understand it, including on their own website) is where I see a potential problem.
The exclusivity requirements for Kindle Unlimited are also anti-competitive (bad form if they are just the dominant store, possibly illegal if they are a monopoly)
mining information from 3rd party products sold on their site is only a problem if the agreements say that they won’t.
I don’t see their pushing prime membership as an issue (I would love for them to be able to show prices low to high including shipping given the ‘low price, high shipping’ approach many 3rd party sellers use)
Overall I’m a defender of Amazon against anti-trust type issues, except for the retail-price based MFN clauses and exclusivity requirements.
Yet those two are the easiest defenses…
You don’t have an issue with Audible at all?
I haven’t heard of problems around Audible, so can’t comment.
Anyone know what the monopoly is?
The monopoly is whatever the hanging judge says it is.
C.f. Jackson, Judge Penrose.
With the DOJ unable to actually prove any of the allegations against Microsoft, he had to settle for defining the “relevant market” as Intel-based personal computers, excluding UNIX WORKSTATIONS, Mini-computers, servers, industrial, and *mobile* computing operating systems, thereby declaring Windows a monopoly despite its presence and minority share in all those other markets. That allowed several roadkill companies to sue for a few billion that MS promptly recouped by raising upgrade pricing by 30%. Despite which, their market share went up.
The only significant outcome of that trial was that under DOJ monitoring Ballmer took MS out of the nascent mobile market, killing the only open smartphone OS and creating two actual monopolies for smartphone app stores. Which the DOJ is now suing to open up.
And the ostensible reason for the lawsuit, bundling a browser with the OS? The market quickly proved correct every argument MS raised for an OS without a bundled browser is useless in the age of internet.
So if the FTC can find a judge deeply invested in Walmart or Rakuten or eBay he can easily find Amazon has a monopoly in whatever he chooses and put it in the findings of fact that can’t be appealed.
On the other hand, horizontal margers like COMCAST/UNIVERSAL and Disney/FOX sail through unchallenged as the media giants are friends of the party.
That’s antitrust in the modern era.
Well, I can see at least two things that will make this hard in an unbiased Court (stop snickering, people).
Prime order fulfillment – prove that vendors can provide the same service for less money. Highly unlikely! Companies like Amazon, or Walmart, or Costco, or any other “high product availability” company has an enormous investment in, and massive operating expense from, their large number of distribution centers.
Paying to have your products in high visibility areas – why do they think certain products end up on the end caps, at the checkout line, in free standing displays that you have to maneuver around in the grocery store? Or the free sample people that are on every other aisle in CostCo on weekends? Not the generosity of the retailer, that’s for sure!
(For snark, I would note that most of the States signing on to the lawsuit are what I call the “gimme” States.)
The Kahn FTC keeps looking for a big win that might get her a platform to Congress. So far, no go. A 34 year old ideologue/activist was an overeach to run a government legal agency. Way over her head.
https://www.nytimes.com/2023/07/13/technology/ftc-lina-khan-hearing.html
And all Amazon has to do is drown the FTC in paper until next year.
(The FTC has seen a big wave of exits from staffers unwilling to have her losses on their resumes.)
Now, if it was the DOJ, AMAZON might have a problem but they’re busy going after Apple and Google for their phone app store monopolies. Much more realistic targets.