Amazon sued by FTC, which alleges the company is ‘exploiting its monopoly power’

“Amazon is a monopolist and it is exploiting its monopolies in ways that leave shoppers and sellers paying more for worse service,” Khan later told reporters.

She added that Amazon
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“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.”

Shares of Amazon were off 3.5% in midday trading.

The long-anticipated action came after the two sides could not reach a settlement over antitrust claims, according to a Wall Street Journal report citing people familiar with the matter. Members of Amazon’s legal team held a video call with FTC officials on Aug. 15 during a so-called last-rites meeting but were unable to agree on concessions, that report said.

The lawsuit, which challenges the tech giant’s business practices as anticompetitive, was filed after months of talks. For years, the agency has been scrutinizing whether Amazon favors its own products over those of competitors on its digital platforms. The FTC also has studied the Amazon Prime subscription service’s bundling practices.

At the core of the FTC’s complaint is the broad influence Amazon wields: It both owns the online platform that many sellers use to reach shoppers, and it sells products on that same platform. Amazon also controls a shipping and delivery network that everyone on the platform is encouraged to use.

Amazon called the lawsuit “wrong on the facts and the law” and said it looks forward “to making that case in court.”

“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition. 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,” Amazon’s general counsel, David Zapolsky, said in a statement. “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.”

Sam Weinstein, an antitrust law professor at Cardozo School of Law in New York, said the FTC faces a daunting task in proving market power and bad intent. “Ultimately, the battle over market definition is the key,” said Weinstein, who worked in the Justice Department’s antitrust division from 2007 to 2015.

Weinstein said the case is similar to one filed by California Attorney General Rob Bonta last year that is wending its way through the court system.

The FTC has pursued two previous actions against Amazon, but this suit will be a decisive test for Khan and the Biden administration. Khan argued in an academic paper published in 2017 that Amazon had amassed too much market power and that U.S. antitrust law had failed to restrain it, and her career was launched in great part on her opposition to some of Amazon’s business practices. The stage is now set for a historic showdown that could take years to make its way through the legal system.

“It is significant, but not necessarily a make-or-break case” for Khan and the FTC, antitrust attorney Abiel Garcia said in an interview. “The courts can only do so much. They will eventually need legislation” to strengthen and update antitrust law in the digital age.

Critics of Amazon cite the more than $108 million the company has spent on lobbying over the last five years, according to OpenSecrets.

The FTC has laid down some regulatory bread crumbs on its way to this historic action, Garcia and other legal experts say.

In prior actions against Facebook parent Meta Platforms Inc.
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and Alphabet Inc.’s
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Google, the agency expressed its concerns about the outsize influence of a handful of tech companies on digital marketplaces.

But so far, anticompetitive actions against Amazon and Big Tech have proven to be frustrating exercises for federal regulators. Shackled by antiquated antitrust law that predates the digital economy by decades, regulators have had difficulties demonstrating that consumers have been harmed.

In fact, Amazon Prime bundles have proved to be wildly popular among consumers for their perks and cost savings, leading major retailers Walmart Inc.
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and Target Corp.
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to create similar services.

“The complaint raises real concerns about how the FTC has shifted its focus from consumer welfare,” Paul Lekas, who leads global public policy at the Software & Information Industry Association, said in an interview. The association’s 450 paying members include Amazon, Apple Inc.
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Google and Meta, along with small businesses.

“Bundling is a practice among retailers and is popular among consumers,” Lekas added. “If successful, this [lawsuit] would lead to higher prices at popular services.”

Consumer advocates, however, see an entirely different scenario.

“The unchecked power of Amazon has often resulted in higher prices and fewer choices for consumers. We applaud the FTC and 17 state attorneys general for opening this investigation into Amazon’s monopoly power,” Sumit Sharma, a senior researcher for tech competition at Consumer Reports, said in a statement. 

Emily Bary contributed.