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Government sues Amazon for allegedly quashing competition

The federal government said Amazon illegally stifles competition by punishing sellers that sell their products for a lower price at other outlets.
Government sues Amazon for allegedly quashing competition
Posted at 11:22 AM, Sep 26, 2023

The federal government joined 17 state attorneys general in a lawsuit against online retailer Amazon for allegedly engaging in a monopoly that "uses a set of interlocking anticompetitive and unfair strategies to illegally maintain" its power. 

The attorneys general of Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island and Wisconsin joined the lawsuit. 

The lawsuit alleges that Amazon's current competitors are prevented from growing and new competitors are unable to emerge. 

"By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance," the Federal Trade Commission said. "Amazon’s far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch hundreds of thousands of products sold by businesses big and small and affect over a hundred million shoppers."

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Amazon has continued to report soaring revenues. In the second quarter of 2023, Amazon reported $134.4 billion in net sales, an 11% increase over the year before. 

In 2022, the company reported $514 billion in net sales, a 9% increase compared to 2021. Prior to last year, Amazon's net sales grew by 18% in 2021 and 30% in 2020. 

The complaint alleges that Amazon punishes sellers that may sell their products for a lower price at other outlets by burying their products on the website. The complaint also alleges that sellers are conditioned to obtain Prime eligibility to use Amazon's costly fulfillment service. 

The FTC also says that Amazon charges sellers dependent on the website costly fees to have their items promoted on Amazon. 

“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, deputy director of the FTC’s Bureau of Competition. “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”

David Zapolsky, Amazon senior vice president of global public policy and general counsel, responded to the allegations. 

"Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition," he said. "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. 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. The lawsuit filed by the FTC today is wrong on the facts and the law, and we look forward to making that case in court."

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