The United States’ Federal Trade Commission (FTC), along with other regulators, has filed a much-anticipated lawsuit against online retail giant Amazon. The lawsuit alleges that the company uses punitive and coercive tactics to unlawfully maintain its monopoly – and exploits its power to benefit itself while raising prices and degrading service for its customers.
This is being seen as the most high-profile case initiated by the FTC in recent years against a big tech company. Moreover, it has been widely anticipated since the appointment of Lina Khan as the regulator’s chair. Khan has had Amazon in her crosshairs for years.
“The lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition,” Khan has said in a statement. In 2017, Khan, then only 29, published a major academic article, arguing the online retailer had escaped anti-competition scrutiny.
Amazon has said that it “fundamentally disagrees” with the FTC’s allegations calling some of them “wrong or misleading”. The company has added it will challenge the lawsuit.
Some of the allegations made by the FTC have previously been investigated by India’s competition watchdog, the Competition Commission of India (CCI).
FTC’s allegations against Amazon
The FTC and 17 state attorneys general have sued Amazon alleging the company’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.
They said that 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; and conditioning sellers’ ability to obtain “Prime” eligibility for their products on sellers using Amazon’s costly Fulfilment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms.
The FTC, along with its state partners, is 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,” a statement has said
In 2020, the CCI ordered an investigation based on allegations by the trade body Delhi Vyapar Mahasangh that Amazon and Flipkart had entered into exclusive sales agreements with smartphone makers to sell certain phones through a small number of preferred sellers.
The Mahasangh also alleged that Amazon and Flipkart had given preferential treatment to certain sellers by giving them higher search rankings and offering to pay for part of the discount that such sellers would offer during key sales periods such as Flipkart’s Big Billion Days and Amazon’s Prime Day.
At the time, the CCI noted that arrangements between smartphone brands and online platforms leading to a few sellers selling certain phones exclusively on a single platform, coupled with alleged links between the platforms and these sellers, merited an investigation.
