Amazon faces FTC lawsuit claiming it keeps prices high

• Amazon is being sued by the Federal Trade Commission, 17 states and other antitrust agencies.
• The lawsuit claims that Amazon uses its power to inflate the prices of small sellers and charge them excessively.
• The FTC has spent months gathering evidence to demonstrate how Amazon disadvantages its sellers.

Amazon has been sued by 17 states and US regulators over allegations of abuse of its position on the market to increase prices, overcharge vendors, and stifle competitiveness.

The lawsuit filed in US District Court for Western District of Washington is the culmination of an investigation that lasted for years into Amazon’s business. It was one of the biggest legal challenges against the company during its 30-year-old history.

According to a news release sent by the agency, the FTC and states that joined the lawsuit are asking the court to issue a permanent injunction court that they say would prohibit Amazon from engaging in its allegedly unlawful conduct and loosen its “monopolistic control to restore competition.”

They claim that Amazon is engaging in anti-competitive behavior through anti-discounting practices, which discourages sellers from offering cheaper prices on non-Amazon websites. These allegations are similar to those made by a lawsuit filed last year by California. Amazon is accused of burying listings on other websites that offer lower prices.

Amazon also allegedly degrades customer service by displaying paid ads instead of relevant search results, favoring Amazon-branded products over others it believes to be better, and charging high fees that force sellers to give Amazon almost half of their sales.

In a press release, FTC chairwoman Lina K Khan noted that the complaint outlines detailed allegations about how Amazon has been exploiting its monopoly in order to enrich themselves while increasing prices and degrading services for the millions of American shoppers who use its platform and hundreds of thousands businesses that rely upon Amazon to reach those customers.

Many people wondered if it would be forced to break up the retail giant. It is also dominant on the cloud computing front and has an increasing presence in other industries like grocery and health care. Khan did not answer questions regarding this in his briefing to reporters. 

Amazon is estimated to control about 40% of the online market. The majority of sales are made by small and medium businesses, as well as individuals. Amazon earns billions from referral fees and advertising to make the products of sellers more visible.

Most third-party retailers also use Amazon’s fulfillment services to store their inventory and send items to their customers. Amazon has been consistently raising fees for those reliant on the program and more recently imposed — and then abandoned — another fee on some who don’t, a move that was blasted by the company’s critics.

Amazon reported revenues of $32.3billion from third party services in the fourth quarter. According to the anti-monopoly organization Institute for Local Self-Reliance, the fees cost US sellers 45% of their revenue in the first half of this year  — up from 35% in 2020 and 19% in 2014.

Amazon is also accused of undercutting the businesses who sell on its website by using merchant data to create its own competing products that are then promoted on the site. In August the company announced it would eliminate some in-house brand names that were not popular with customers, and relaunch items under other brands like Amazon Basics or Amazon Essentials. Bookstores and authors also urged the Department of Justice (DOJ) to investigate Amazon’s “monopoly on the market for books, ideas and other products.”

Amazon didn’t immediately respond to our request for comment on Tuesday.

If Khan is successful in a court case, it could be a major boost to her career. A Big Tech critic at the FTC, she gained fame as a Yale student in 2017 when she wrote “Amazon’s Antitrust Paradox.” In 2021, Amazon had sought to get her recused from agency probes against the company because of her earlier criticism.

A few of the accusations made by the agency against Amazon are the same as those in a separate case filed last year in California. A District of Columbia case against Amazon that was filed last year by a federal district judge has been thrown out and is under appeal.

The FTC filed the federal complaint after other actions it has taken against Amazon over the last few months. In June, the agency sued the company, alleging Amazon was using deceptive practices to enroll consumers into Amazon Prime and making it challenging for them to cancel their subscriptions. Amazon disputes the claims.