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October 5th, 2023
Seventeen states and the Federal Trade Commission have assembled to bring a lawsuit against Amazon in the company’s home state of Washington. Citing the company’s “monopoly power,” the FTC issued a statement following the agency’s four-year investigation into Amazon’s business practices:
“The FTC and its state partners say Amazon’s actions allow it to stop rivals and sellers from lower prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon… Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”
The FTC Complaint alleges that Amazon’s exclusionary business practices make it impossible for competitors to gain a foothold in the market, ultimately harming both small businesses and consumers. At the time of the FTC Complaint’s filing, Amazon’s market capitalization was over $1.3 trillion. Notably, the lawsuit clarifies that it is not seeking to punish Amazon for “being big, but by how it uses its scale and scope to stifle competition.” Some of these practices include biasing Amazon-preferred products in search results, charging exorbitant fees on sellers with no meaningful alternative than Amazon, and promoting anti-discounting measures that punish sellers from offering prices lower than Amazon.
In a heavily redacted section of the FTC complaint, the plaintiffs also cite Amazon’s “Project Nessie,” an internal company algorithm and/or system that Amazon has requested be withheld from the public complaint. Some have speculated that Project Nessie involves a secret algorithm that allows Amazon to overcharge customers based upon rapid adjustments to competitor pricing.
In a statement addressing the FTC lawsuit, Amazon asserts that its platform has allowed 500,000 independent businesses of all sizes to reach a greater customer base. The question posed by the FTC is whether these independent sellers reflect a boon to competition and consumers or the reality that sellers are forced to play exclusively by Amazon’s rules to stay in business.
