The Federal Trade Commission (FTC) is gearing up for what Bloomberg has called a significant antitrust lawsuit against tech giant Amazon. The impending lawsuit accuses the corporation of exploiting its significant influence to reward online merchants who utilize its logistics services while punishing those who opt-out. This news follows a series of prior lawsuits initiated by the FTC under the supervision of Chair Lina Khan.
The anticipated lawsuit focuses primarily on Amazon’s dominant online marketplace. The FTC is expected to file this broad-reaching antitrust suit in the coming weeks, backed by confidential documents and insiders familiar with the case. The goal appears to be to initiate major structural changes in Amazon’s business operations. Khan, known for her criticism of Amazon, is unlikely to entertain compromises and may drive for substantial alterations.
Before ascending to the FTC chair position in 2021, Khan was known for her confrontational stance against Amazon’s dominance. This position was underlined in her 2017 Yale Law Journal piece, “Amazon’s Antitrust Paradox,” where she advocated for a more vigorous approach to antitrust enforcement.
In addition to this looming lawsuit, the FTC recently filed three separate lawsuits against Amazon. One accuses Amazon of deceiving consumers into subscribing to their $14.99-per-month Prime service, making the cancellation process excessively difficult. In response, the FTC seeks civil penalties and a permanent injunction, among other forms of monetary relief.
Another pair of lawsuits accuse Amazon of privacy violations, one connected to children’s Alexa voice recordings and the other relating to the alleged invasion of users’ privacy by Amazon’s Ring division. Amazon agreed to financial penalties and changes in privacy practices in both instances.
As for the forthcoming major lawsuit, FTC investigators and Khan’s team have spent several months perfecting the complaint and are finalizing crucial details, including where to file suit. The FTC’s filing options include a federal court or their administrative process.
Previously, Amazon and Meta-owned Facebook have challenged Khan’s objectivity, requesting her recusal from antitrust investigations into their operations. Despite an FTC ethics official recommending her recusal from the Meta case, Khan has dismissed these requests.
Third-party sellers can avail themselves of Amazon’s warehouse, shipping, and other services through its Fulfillment by Amazon (FBA) system, which extracts a significant percentage of their revenue. A Marketplace Pulse study discovered that Amazon is retaining over 50 percent of sellers’ revenue, marking an increase from 40 percent five years ago. This rise is due to increased fulfillment fees and the mandatory nature of advertising expenditure.
The FTC alleges that Amazon penalizes sellers who do not use its services, focusing on an algorithm that favors sellers in the coveted ‘Buy Box’ of its web store. Similar allegations were previously made in a 2020 US House subcommittee report and a European antitrust case.
The current FTC investigation into Amazon began two years before Khan’s chair appointment. Upon assuming her role in 2021, Khan has been personally involved in the questioning and investigation processes, significantly intensifying the probe into Amazon’s practices.
