Amazon accused of wielding monopoly power over online retail in landmark lawsuit

The Federal Trade Commission (FTC) has accused Amazon of wielding monopolistic control over online markets used by shoppers and sellers in a landmark lawsuit for chair Lina Khan.

The case brought by the FTC and 17 state attorneys-general said Amazon uses “a set of interlocking anticompetitive and unfair strategies” to maintain monopoly power. Its manoeuvres allegedly stopped competitors and sellers from lowering prices and allowed Amazon to reduce quality for shoppers and overcharge sellers while quashing innovation and competition, they said.

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” Ms Khan said in a statement.

“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 competition bureau. “Seldom in the history of US antitrust law has one case had the potential to do so much good for so many people.”

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The lawsuit is one of the biggest tests yet of Ms Khan’s more aggressive enforcement stance towards Big Tech, which she believes has skirted regulatory scrutiny for decades, allowing groups to amass corporate power via anticompetitive conduct.

Before being appointed as FTC chair by Joe Biden, Ms Khan rose to prominence with a 2017 academic paper calling for the break-up of Amazon. Amazon’s strategy of “choosing to price below-cost and expand widely” had allowed it to “evade government scrutiny” and be at “the centre of ecommerce and [the company] now serves as essential infrastructure for a host of other businesses that depend upon it”, she wrote at the time.

The FTC in June separately sued Amazon for allegedly tricking customers into signing up for its Prime service without their consent. Amazon at the time called the claims “false on the facts and the law”. In May Amazon agreed to pay $25 million to settle a lawsuit brought by the FTC and the US Department of Justice charging it with violating children’s privacy laws via its Alexa voice assistant.

The company is facing a string of other legal challenges. Lawsuits alleging unfair behaviour by Amazon have also been filed by the attorneys-general of California and District of Columbia.

The case comes as the UK’s competition watchdog considers whether to accept a series of changes to how Amazon operates in the country, which were proposed by the company to quell the regulator’s concerns.

Amazon has requested Ms Khan be recused from matters involving the company, citing her long-standing criticism, but its efforts have not succeeded. When asked about potential impartiality at a congressional hearing in 2021, Ms Khan said she had “none of the financial conflicts or personal ties that are the basis of recusal under federal ethics laws”.

Under the Biden administration, top antitrust officials including Ms Khan and Jonathan Kanter, head of the DoJ’s antitrust unit, have stepped up enforcement efforts in an attempt to crack down on corporate power in the US.

Mr Kanter has sued Google for dominance in digital advertising, and a trial is ongoing in another case accusing the company of monopolising internet search.

The FTC is fighting to force Meta to unwind its acquisitions of Instagram and WhatsApp. It also sought to block Meta’s acquisition of virtual reality business Within, but ultimately withdrew the challenge. The FTC is still trying to block Microsoft’s acquisition of Activision after facing initial losses in court. – Copyright The Financial Times Limited 2023