Bloomberg writes that the Federal Trade Commission (FTC) "plans to file a far-reaching antitrust suit focused on Amazon’s core online marketplace." The filing is expected "in the coming weeks."
This suit would be the fourth filed against Amazon by the FTC since Lina Khan became chair of the agency. Khan, Bloomberg writes, "rose to prominence articulating fresh analysis of how the Seattle-based company abuses its market power. In a prominent law review article, Khan argued that the existing antitrust enforcement framework was ill-equipped to tackle the potential harm Amazon poses to competition."
This expected suit, the story says, will focus on charges that "Amazon leverages its power to reward online merchants that use its logistics services and punish those who don’t."
Some context from the Bloomberg story:
"Amazon’s sprawling marketplace is the heart of the company’s e-commerce operations. Third-party merchants, who now account for more than half of the company’s online sales, pay a commission on each sale and can also pay Amazon for services that range from warehousing and shipping to advertising.
"These fees are optional, but most merchants consider them necessary costs of doing business. Amazon’s average cut of each sale on its marketplace has increased in recent years, surpassing 50% in 2022, according to a study by Marketplace Pulse, up from 35% in 2016.
"The FTC has amassed evidence that the company disadvantages sellers that don’t use these services, and the agency is investigating an algorithm that selects merchants for the web store’s coveted 'Buy Box,' where consumers can add products to their cart with one click … Amazon has long said it puts customers first - a credo employees are taught to espouse in antitrust training, according to documents viewed by Bloomberg. This antitrust suit would be the FTC’s fourth case this year that seeks to call the company’s famous focus on customers into question.
"In May, the agency sued the e-commerce giant in two separate cases for failing to delete data about kids collected by its Alexa speakers and illegally spying on users of its Ring doorbells and cameras. Amazon said it disagreed with the FTC’s allegations, but agreed to pay $30.8 million to resolve the cases.
"Last week, the FTC again sued Amazon in a consumer protection case, alleging the company duped consumers into signing up for Prime membership and deliberately made it hard to cancel. The FTC’s filing of that case took Amazon executives by complete surprise, according to two people familiar with the situation. The FTC is separately investigating Amazon’s proposed $1.65 billion acquisition of Roomba vacuum maker iRobot Corp."
- KC's View:
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First, my usual caveat - I am not a lawyer, nor an antitrust expert.
I think there is an interesting case to be made that Amazon's claim to always put its customers first has become, at least in some cases, lip service. After a time during the pandemic when the company invested massive amounts in infrastructure that made it possible to satisfy unprecedented shopper demand. the company is both right-sizing and trying to figure out how to wring more profits from the system.
I think that means a greater emphasis on advertising, for example, in a way that diminishes the shopper experience.
But I do wonder about the FTC focus on how Amazon treats its third-party sellers. Sure, one could say that it is punishing vendors that don't use certain services. But I could also frame it as Amazon giving better clients better treatment. it is not punishing one class of vendors as much as it is rewarding another class.
Again, I'm not sure what is legal and what isn't. But an article of faith around here is that retailers should give better treatment to their best customers, and that it is incumbent on them to use data analysis so they have a clear idea of who these best shoppers are - and why. Doesn't it make sense that a retailer like Amazon should give better treatment/lower costs to its best vendors - the ones that use more of its suite of offerings, which enables Amazon to control more of the supply chain and ensure that they live up to the promise made to customers?
I'm just trying to reason this out. While I admireLina Khan and tend to admire her approach to antitrust in general, I'm just not sure about this expected suit. (I do, however, appreciate her not filing the suit while I was on vacation last week.)
