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FTC Sues Amazon in Antitrust Lawsuit | October 2023

Published Date
Author Linda Ferrell

According to the Federal Trade Commission (FTC) and 17 U.S. states, Amazon illegally has monopoly power. According to the lawsuit, Amazon has the power of a monopoly, maintaining artificially high prices, preventing sellers from leaving its marketplace, and harming rival e-commerce platforms. 

What is the FTC? 

The Federal Trade Commission (FTC) greatly influences business activities related to questionable business practices and consumer protection. The FTC regulates a wide variety of business practices, but it particularly focuses on anticompetitive business practices and consumer protection. 

Inside the FTC’s complaint 

The lawsuit focuses on Amazon’s business practices and the tactics it uses to remain the dominant e-commerce competitor. The FTC believes Amazon makes it difficult, if not impossible, for other e-commerce platforms to compete, forces merchants to pay various fees and follow various rules that benefit Amazon alone and inflates prices. 

According to the complaint, Amazon uses anti-discounting measures that harm sellers who offer lower prices on other websites. The agency also alleges Amazon has illegally “tied” sellers by requiring them to use Amazon logistics services if they want their products to be included in the Amazon Prime program. This type of tying arrangement can violate antitrust laws. The FTC also says merchants feel they cannot be successful on the Amazon marketplace unless they pay for advertising. 

These practices can potentially harm consumers as well. The lawsuit claims sellers feel they must buy ads and use Fulfilment by Amazon to qualify for Prime to improve their search rankings. This has allegedly resulted in higher expenses for sellers that are passed on to consumers. 

Lina Khan, the chairperson of the FTC, says antitrust enforcers and courts have given Amazon a pass for years. In a statement from Khan, she said the e-commerce giant exploits its monopoly power to benefit itself while increasing prices and making services worse, affecting millions of American consumers and hundreds of thousands of merchants. The lawsuit says Amazon has a reputation for low prices and fast delivery but has become a gatekeeper of sorts for online shopping. 

What is a monopoly? 

A monopoly occurs when there is a lack of competition in a particular market. When a company has little to no competition, it can increase prices and reduce choices for consumers. Generally, monopolies are considered to be bad for the economy. Some monopolies are legal because the cost of creating the good or supplying the service is so great that new producers cannot compete for sales. Antitrust laws are designed to promote competition and prevent monopolies.  

Monopoly lawsuits are rare. The FTC and the Department of Justice often take preventative measures and attempt to block illegal acquisitions that could stifle competition, such as when the FTC challenged Microsoft’s acquisition of Activision Blizzard. But it’s much less common for the FTC to call for the breakup of companies for other anticompetitive behavior.  

Supporters of the fight against Amazon say the company is too big, harming consumers and other businesses, and that a successful lawsuit would improve free competition. Critics say the FTC’s actions are antibusiness and serve to micromanage the country’s economy. 

This is not the first time Amazon has been a target of the FTC. In June 2023, the FTC sued Amazon for deceptive marketing tactics, claiming the company tricked customers into Prime subscriptions and made cancelations difficult.  

Amazon’s response 

According to a statement from Amazon’s general counsel and head of public policy, Amazon believes the lawsuit is misguided because Amazon provides great opportunities for many businesses, offers faster delivery speeds, has low prices, and has a wide selection of products. The company says if the lawsuit is successful for the FTC, it would decrease delivery time, increase prices, and negatively affect Amazon merchants. 

Currently, Amazon—which has more than $500 billion in annual revenue—controls 38 percent of all online retail in the United States, including 82 percent of the ebook market. Lawsuits like this typically take years to come to an end because they must go to trial or be settled outside of court, so it is unlikely there will be significant changes anytime soon. 

In the Classroom 

This article can be used to discuss consumer protection (Chapter 2: Business Ethics and Social Responsibility). 

Discussion Questions 

  1. What is the Federal Trade Commission and how does it fight monopolies? 

  1. How do monopolies harm consumers?  

  1. In your opinion, does Amazon have an illegal monopoly? Why or why not? 

This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt. 

Sources 

Dave Michaels and Dana Mattioli, "FTC Sues Amazon, Alleging Illegal Online-Marketplace Monopoly," The Wall Street Journal, September 26, 2023, https://www.wsj.com/tech/ftc-sues-amazon-alleging-illegal-online-marketplace-monopoly-6bd9af23  

David McCabe, "U.S. Accuses Amazon of Illegally Protecting Monopoly in Online Retail," The New York Times, September 26, 2023, https://www.nytimes.com/2023/09/26/technology/ftc-amazon.html  

Sarah Morrison and A.W. Ohlheiser, "9 Questions about the Government's Effort to Break Up Amazon," Vox, September 29, 2023, https://www.vox.com/technology/2023/9/29/23894832/amazon-antitrust-lawsuit-questions-answered-ftc-lina-khan  

About the Author

Linda Ferrell is the Roth Family Professor of Marketing and Business Ethics in the Raymond J. Harbert College of Business, Auburn University. She was formerly Distinguished Professor of Leadership and Business Ethics at Belmont University. She completed her Ph.D. in business administration, with a concentration in management, at the University of Memphis. She has taught at the University of Tampa, Colorado State University, University of Northern Colorado, University of Memphis, University of Wyoming, and the University of New Mexico. She has also team-taught classes at Thammasat University in Bangkok, Thailand.

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