The FTC Sues Amazon
May 10, 2024
Following a year-long investigation, the Federal Trade Commission (FTC) and 17 U.S. states filed an antitrust lawsuit against Amazon over allegations that the ecommerce giant practices illegal anti-competitive behaviors to maintain “monopolistic control” over the ecommerce industry.
The plaintiffs hope it will open competition, lower product prices, and lower costs for sellers. However, Amazon argues if the FTC and other plaintiffs win the case, it will raise prices, slow deliveries, and reduce options for small businesses. Under either scenario, sellers will be interested to see how this case may shift policies that impact their ecommerce businesses
The Allegations
The plaintiffs argue that Amazon inflates online prices, priorities its own brand over other products, compels sellers to use Fulfillment by Amazon to qualify for Amazon Prime, buries listing offered at lower prices on other sites, and forces sellers to pay nearly half of their total revenues to Amazon (a rate that has increased from just 19% in 2014), all of which is meant to stifle competition and maintain their control over the industry.
In particular, the FTC’s lawsuit centers on the “minimum pricing” policy” which prevents sellers from offering lower prices off Amazon, ultimately allowing Amazon to set prices.
Amazon controls roughly 40% of the ecommerce market with 9.7 million active sellers and reaching 310 million consumers globally. The next most competitive U.S. ecommerce company is Walmart, which accounts for just 6.6% of the market. The case could have major repercussions for the ecommerce economy, given the dominance Amazon currently has in online shopping.
Impact on E-commerce Sellers
If the FTC prevails, Amazon may be forced to change its business practices, potentially leading to lower fees and more flexible policies for sellers.
Under this scenario, Amazon may have to abandon its minimum pricing policy, allowing sellers to offer more competitive prices on the platform. Additionally, Amazon could be restricted from giving preferential treatment to its own products, ensuring a fairer marketplace for third-party sellers. These changes could potentially lead to lower profits for Amazon, but they could also improve the customer experience by offering a wider range of products at competitive prices.
However, a win for Amazon could maintain its ecommerce dominance in the market, leaving many sellers feeling as if they don’t have a choice but to sell on Amazon and adhere to their policies.
The outcome of the case will likely determine the future of competition in the e-commerce market. While there is no clear winner yet, one thing is certain: the results of this lawsuit will be felt by both Amazon and the countless sellers who depend on its platform.