Is Amazon a Monopoly? The Federal Trade Commission Thinks So
It goes without saying that Amazon has been a force within the e-commerce industry for quite some time. As of mid-2023, the retail giant held nearly 50% of all online industry sales in computer and electronics products, over 45% of online sales in office equipment and supplies, and one-quarter of online sales of health, personal care, apparel, and furniture. Is this the result of competitive business practices, or does it suggest Amazon uses anti-competitive processes to corner the e-commerce market? The Federal Trade Commission (FTC) believes it’s the latter.
Why Did the FTC Sue Amazon?
When one controlling entity essentially controls the entire supply chain of a good or service, it is considered a monopoly. Monopolies are illegal because they limit choices, price flexibility, and innovation, all of which are not good for consumers or the economy.
In this case, Amazon’s size and industry dominance are not inherently monopolistic. However, its alleged exploitative and damaging behaviors could be. The FTC’s complaint states that the company actively seeks to prevent competitors from expanding or even emerging. By using coercive methods and punitive tactics, Amazon stifles competition and prevents every other company from reaching consumers and sellers in any meaningful way. According to the FTC, the lawsuit intends to hold the company accountable and restore the balance.
As of the time of this writing, the following states have joined the FTC’s lawsuit:
- Delaware
- Connecticut
- Massachusetts
- Maine
- New Jersey
- New York
- Maryland
- Michigan
- Rhode Island
- Nevada
- Minnesota
- Oklahoma
- Wisconsin
- New Hampshire
- Pennsylvania
- Oregon
- New Mexico
The Deputy Director of the Bureau of Competition believes that this lawsuit is an unprecedented opportunity to impart positive change, stating that there has seldom been such potential in U.S. antitrust law history. The company’s annual sales reach into the hundreds of billions of dollars. The magnitude of Amazon’s control over the digital marketplace means that the results of this case could have a nearly unimaginable impact.
The FTC Argument
Among the many anticompetitive tactics that the FTC claims Amazon has engaged in are the following:
- Pushing listings from Amazon sellers offering cheaper goods on other sites down in the search rankings so they cannot reach consumers.
- Coercing sellers into using Amazon’s fulfillment service by only offering Prime status to those sellers.
- Placing Amazon products of lower quality higher in search results than other brands of better quality.
- Charging exorbitant fees for Amazon sellers to continue offering their products on Amazon.
- Replacing organic search results with paid advertisements that degrade customer experience.
The FTC believes that Amazon’s anticompetitive strategies and illegal tactics are an established behavior pattern intended to create monopoly power.
This lawsuit could bring monumental changes affecting everyone using any online marketplace. EmergeCounsel will monitor this case’s progress to stay up-to-date on the latest changes. Also, we are experts in addressing issues on e-commerce platforms, especially with Amazon. If you have any questions or issues, please contact me.