In yet another declaration of war against capitalism, The Federal Trade Commission has turned its attention to dismantling Amazon. Citing that the company holds an “illegal monopoly,” the Biden FTC is taking the online retail giant to court for using its power to benefit itself at the expense of American families and businesses.
The FTC, backed by 17 states, alleges that Amazon has engaged in a series of anti-competitive practices. These actions, according to the lawsuit, have led to higher prices for consumers, adversely affected third-party sellers operating on Amazon’s marketplace, and created significant barriers for other e-commerce platforms and retailers seeking to compete. The complaint comprises a total of 20 charges, encompassing allegations of maintaining a monopoly in the online superstore and online marketplace services markets, employing unfair competitive tactics, and violating multiple state antitrust laws.
The lawsuit, filed on September 26, 2023, covers allegations of increasing prices while providing lower-quality services to the millions of consumers and the numerous businesses that use the platform.
The suit primarily revolves around how Amazon compels third-party sellers on its Marketplace, responsible for roughly 60% of Amazon’s sales, to buy extra services from Amazon. Critics argue that Amazon’s increasing fees over the years have forced sellers to reduce their profits or raise prices for consumers. The FTC asserts that, when all fees are considered, many sellers end up paying nearly half of their revenue to Amazon, potentially leading to increased costs for consumers.
The FTC alleges that Amazon employs various strategies to boost its profits, which, in all fairness, is the goal of any business. This includes the use of search ads, where sellers can pay for prominent placement in customer searches, often displacing organically ranked products, which, again, in all fairness, is how advertising works. Amazon has increased the number of ads in search results, pushing sellers to believe that paying for ads is the only way to gain visibility – again, the goal of paying for advertising.
The FTC’s claim also addresses the “buy box,” which determines which seller’s product is displayed when multiple sellers offer the same item. Amazon sets conditions that increase a seller’s chances of getting the buy box, often requiring them to pay Amazon more money.
Paying for higher search results? That’s almost like paying for advertising.
FTC Chair Lina Khan has made it her career goal to end Amazon, frequently complaining about the retail giant and criticizing the online marketplace. Khan has been targeting major tech companies and their business practices, and this marks the first case filed under her leadership that directly addresses these practices at one of these major corporations.
Amazon seems a predictable target of an administration bent on destroying the American economy and ruining the lives of Americans by taking away their purchasing power, but the premise of the lawsuit’s claim that Amazon is violating antitrust laws is ridiculous. Amazon Web Cloud Computing Services constitutes approximately a third of the market, giving it a significant share that still falls short of meeting the 70 to 80% market share criteria as defined by the Sherman Antitrust Act to indicate a monopoly.
While Amazon holds slightly over a third of total sales, Walmart’s e-commerce operations are narrowing the gap. In the past year, Amazon’s sales growth was modest, at less than 5%, but Walmart’s sales growth was three times more than the online retail platform. Further, Amazon claims just a 7% share of the online advertising market, trailing significantly behind Google and Google.
David Zapolsky, Amazon’s SVP of Global Public Policy and General Counsel, defends the company’s practices, stating that they have fostered competition and innovation in the retail industry. He argues that these practices have led to a wider product selection, lower prices, and faster delivery for Amazon customers while providing opportunities for businesses in Amazon’s marketplace. He suggests that if the FTC succeeds, it could lead to reduced product choices, higher prices, slower deliveries, and fewer options for small businesses, which goes against the intended goals of antitrust law.
But Khan and the FTC will stop at nothing short of breaking up the online retail giant.
Amazon, once the pandemic savior for 230 million Americans, now faces opposition from the very administration that previously boosted its success through lockdowns and restrictions on in-person shopping. This dramatic shift sees Amazon transition from hero to perceived villain as the Biden administration wages its unending battle against convenience, affordability, and capitalism.