FTC and 17 States Sue Amazon 'for Illegally Maintaining Monopoly Power'

The Federal Trade Commission sued Amazon on Tuesday, alleging that it is a “monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power,” according to a press release. Seventeen state attorneys general joined the suit against the company.

The complaint, filed in the U.S. Western District of Washington, seeks a permanent injunction preventing Amazon from engaging in the alleged conduct in order to “pry loose Amazon’s monopolistic control to restore competition,” the press release stated, as well as monetary relief to States. The Commission voted unanimously to file the complaint. 

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

It’s not clear whether the FTC will seek to break up the company—in a press briefing, Khan said the current focus of the complaint was “liability.”

The complaint alleges that Amazon’s “anticompetitive conduct” occurred both in its consumer-facing marketplace and in its dealings with sellers. It alleges that Amazon’s tactics keep prices higher for good across the web, for example by burying sellers who are offering lower prices elsewhere. It also alleges that requiring sellers to use Amazon's “costly” fulfillment service in order to be eligible for Prime is anticompetitive.

It also argues that Amazon’s “illegal, exclusionary conduct makes it impossible” for competitors to gain a foothold in the market, which allows the company to “[extract] enormous monopoly rents from everyone within its reach." Amazon’s conduct allegedly includes degrading the search function by littering organic results with paid advertisements, promoting Amazon products above those that “Amazon knows are of better quality,” and charging sellers costly fees that can lead to them paying up to half of their revenue to the company. 

The lawsuit also contains some notable redactions. For example, it refers to a “Project Nessie” that has “already extracted over [redacted] from American households.” It’s not clear what this refers to, but Amazon states on its website that Nessie is the name of “a system used to monitor spikes or trends on Amazon.com.”

“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition,” said David Zapolsky, the senior vice president of Amazon’s Global Public Policy and the company’s general counsel, in a 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. 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. The lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court.”

This is the largest action the FTC has taken against the company this year, but it is not the first. The Commission sued the company in June over its allegedly “manipulative” Amazon Prime service, which required navigating a “labyrinthine” 15-step cancellation process. It also took action against Amazon Ring for failing to stop hackers who broke into the security cameras. 

The FTC’s complaint comes on the heels of another major antitrust lawsuit filed against Google by the U.S. Department of Justice in January, arguing that Google has illegally monopolized digital advertising technologies.

“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy,” said John Newman, the 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.”