The US Federal Trade Commission (FTC) and a bipartisan coalition of 17 state attorneys general sued Amazon on Tuesday, September 26, 2023, over violations of antitrust law and harming consumers. The lawsuit is the latest challenge from the US government to break Big Tech’s dominance of the internet. And now, Amazon faces antitrust lawsuit from US government and 17 states.
What are the allegations?
The complaint alleges that Amazon unfairly promotes its own platform and services at the expense of third-party sellers who rely on the company’s e-commerce marketplace for distribution . According to the FTC, Amazon has harmed competition by:
- Requiring sellers on its platform to purchase Amazon’s in-house logistics services in order to secure the best seller benefits, referred to as “Prime” eligibility .
- Forcing sellers to list their products on Amazon at the lowest prices anywhere on the web, instead of allowing sellers to offer their products at competing marketplaces for a lower price .
- Ranking its own products in marketplace search results higher than those sold by third parties .
The FTC claims that because of Amazon’s dominance in e-commerce, sellers have little option but to accept Amazon’s terms, resulting in higher prices for consumers and a worse consumer experience . The FTC also accuses Amazon of “suffocating rivals, depriving them of oxygen, and really leaving a stunted landscape in its wake”.
What are the consequences of Amazon faces antitrust lawsuit from US?
The FTC and the 17 states are asking the court to issue a permanent injunction ordering Amazon to stop its unlawful conduct. So in this way, Amazon faces antitrust lawsuit from US government and 17 states.The lawsuit could potentially lead to structural remedies, such as breaking up parts of Amazon’s business or imposing behavioral restrictions on how it operates.
The lawsuit could also have significant implications for the future of online retail and the power of Big Tech companies. If successful, the lawsuit could alter the way Americans shop online and create more opportunities for innovation and competition in the e-commerce sector.
How Amazon business model work?
Amazon offers a wide range of products and services to its customers, such as online retail, cloud computing, digital content, artificial intelligence, and more. Amazon makes money from various sources, such as:
- Online stores: This is the core of Amazon’s business model, where it sells millions of products across different categories, such as books, electronics, clothing, groceries, and more. Amazon also sells its own branded products, such as Kindle, Echo, Fire TV, and more.
- Physical stores: This is a relatively new segment of Amazon’s business model, where it operates physical retail stores, such as Whole Foods Market, Amazon Go, Amazon Books, Amazon 4-star, and more. These stores offer a variety of products and services, such as fresh food, cashierless checkout, curated selection, and more.
- Third-party seller services: This is where Amazon allows other sellers to sell their products on its platform and provides them with various services, such as fulfillment by Amazon (FBA), seller advertising, seller subscription fees, and more. This segment generates revenue from commissions, fees, and advertising.
Amazon’s business model works by leveraging its scale, technology, data, and network effects to create value for its customers and stakeholders. Amazon invests heavily in innovation and experimentation to improve its products and services and expand into new markets. Amazon also focuses on efficiency and optimization to reduce its costs and increase its margins. Amazon’s business model is constantly evolving and adapting to the changing needs and preferences of its customers and the competitive environment.
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How did Amazon respond?
Amazon has denied the allegations and vowed to fight the lawsuit because Amazon faces antitrust lawsuit from US government and 17 states. The company said that it offers “the best prices, selection, and convenience for our customers” and that it “empowers small and medium-sized businesses to succeed in our store”. Amazon also argued that the FTC’s lawsuit is based on “flawed legal theories” and that it is “the opposite of what antitrust law is designed to do”.
Amazon also criticized FTC Chair Lina Khan, who has been a vocal critic of Amazon’s market power and business practices. The company said that Khan has “a long-standing hostility toward Amazon” and that she should recuse herself from any involvement in the case. However, Khan has refused to step aside, saying that she is following the ethics rules and that her views are well within the mainstream of antitrust law.
How are other stakeholders reacting?
The Amazon faces antitrust lawsuit from US has drawn mixed reactions from other stakeholders, such as lawmakers, consumer groups, industry associations, and competitors.
Some lawmakers have praised the FTC and the 17 states for taking action against Amazon’s alleged monopoly. Senator Amy Klobuchar (D-Minn.), who chairs the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, said that
“This lawsuit is an important step toward ensuring a fair marketplace for consumers and small businesses”
Amy Klobuchar
Representative David Cicilline (D-R.I.), who chairs the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, said that
“Amazon’s abuse of its dominant position harms innovation, reduces consumer choice, and increases prices”
David Cicilline
Some consumer groups have also expressed support for the lawsuit, saying that it could benefit shoppers by lowering prices and improving quality. Public Citizen, a nonprofit consumer advocacy organization, said that “the FTC’s action today is a welcome sign that it is serious about reining in Big Tech’s power over our economy and democracy”. Consumer Reports, a nonprofit consumer research group, said that “this lawsuit could help level the playing field for consumers who want more choices and better prices when they shop online”.
Some industry associations have also welcomed the lawsuit, saying that it could create a more competitive environment for online sellers. The American Booksellers Association (ABA), a trade group representing independent bookstores, said that “this lawsuit is long overdue” and that “Amazon’s predatory pricing and other anticompetitive practices have harmed booksellers, authors, publishers.