The Federal Trade Commission and 17 state attorneys general have brought forth an expected antitrust lawsuit against Amazon on Tuesday. They claim that the e-commerce company is using its dominant market position to artificially inflate prices, negatively impacting consumers and stifling competition.
In a statement, FTC Chair Lina Khan stated that our complaint outlines Amazon’s use of harsh and forceful methods to unjustly uphold its monopolies. The complaint presents specific accusations that demonstrate how Amazon is currently taking advantage of its monopoly status to benefit itself, resulting in increased prices and decreased service for the millions of American households who use its platform and the numerous businesses that depend on Amazon to reach their customers.
She stated, “The lawsuit filed today aims to hold Amazon responsible for their monopolistic actions and restore the original promise of fair and open competition.”
Molson Hart, the seller of the educational building-toy brand Brain Flakes, stated in an April blog post that despite millions of people visiting Amazon.com daily, there is no guarantee for third-party sellers that their products will be seen. Hart also mentioned that his company spent approximately $100,000 on advertising in Amazon searches last year and believes the company’s pricing policies contribute to inflation.
The states that have joined the FTC in the legal case are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.
Khan sees the FTC’s actions against Amazon as a crucial case that will showcase the agency’s power to enforce regulations. This also supports her previous argument, made while she was a law student at Yale, that the company is a monopoly.
Facebook and Amazon.
Under her leadership, the FTC has become significantly more assertive in enforcing regulations compared to past years. However, Khan has recently faced defeat in several prominent cases against major American corporations such as Facebook and Amazon.
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According to a statement sent via email, Amazon stated that the lawsuit is incorrect in both its factual and legal basis.
The FTC claims that the methods in question have stimulated competition and progress within the retail sector, resulting in increased options, reduced prices, and quicker shipping for Amazon customers. Additionally, these methods have created more opportunities for the numerous businesses that use Amazon’s platform to sell their products. The company stated this.
The statement also mentioned that if the FTC’s proposal is approved, consumers will experience limited options for products, longer wait times for deliveries, and increased prices.
The Federal Trade Commission alleges that search results manipulate or suppress lower prices.
The legal action claims that Amazon is unlawfully impeding competition in two areas – its well-known online store for consumers, and the market for services provided to sellers on its online marketplace.
The government claims that Amazon employs tactics to discourage online sellers from offering lower prices than what is available on their platform. The FTC alleges that the retailer strategically buries these discounting sellers in their search results, essentially making them invisible to potential buyers.
One merchant, toy maker Hart, agrees with that argument.
According to Hart’s blog, if Viahart LLC, his Texas-based company, offered lower prices for its building kits on Walmart.com compared to Amazon, the products would no longer be available on the latter’s website. As Amazon makes up 90% of Viahart’s sales, Hart emphasized that it is crucial to have their products visible and accessible.
According to the speaker, Amazon’s pricing strategies prevent budget-conscious shoppers from comparing a product they discovered on Amazon to the seller’s website and potentially discovering a more affordable option.
Hart stated that customers have the option to select either a less expensive website with potentially slower shipping or the familiar and beloved Amazon Prime. However, Amazon’s pricing policies hinder consumers from exercising this choice by prohibiting sellers from setting lower prices outside of the Amazon platform.
On Tuesday, a legal case was filed arguing that Amazon pressures merchants to utilize their costly fulfillment service in order to gain “Prime” qualification for their goods. The FTC asserts that this qualification is crucial for conducting business on Amazon.
Breaking up Amazon?
Several consumer advocates praised the legal action, including the Athena Coalition, an organization that has been critical of Amazon’s business tactics, which urged the government to “dismantle Amazon.”
The Athena Coalition stated that if a company holds such immense power, it will act like a bully by favoring certain individuals or companies, mistreating employees, increasing prices for consumers, and harming the environment. They believe that Amazon should not have the authority to create biased rules and violate laws without consequences.
However, some individuals expressed disapproval towards the FTC’s case, deeming it to be excessive and all-encompassing, and predicting that it would not be successful in the court of law.
“According to Geoffrey A. Manne, president and founder of the International Center for Law & Economics, a nonprofit public policy research group, this situation has the potential to significantly impact consumers in an effort to sway the direction of U.S. antitrust policy, going against the wishes of Congress and the court. Manne expressed this concern in an email.”
leading e-commerce platform, reported a surging revenue of $386 billion in 2020
In 2020, Amazon, a company with various business ventures, including a prominent online shopping platform, earned a staggering $386 billion in revenue.and
The company is a crucial aspect of the lives of many Americans, but its rapid expansion has consistently prompted demands for it to be controlled. Critics argue that the company utilizes monopolistic tactics to maintain its dominance.
Amazon’s stock price decreased by $5.29, or 4%, and ended the day at $125.98.
According to an equity analyst at D.A. Davidson, Tom Forte, the Biden administration’s decision to pursue legal action against big technology companies suggests a stronger effort to control their excessive influence compared to previous administrations.