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Amazon sued by US government in landmark monopoly case

An Amazon company logo marks the facade of a building in Schoenefeld near Berlin, March 18, 2022.
An Amazon company logo marks the facade of a building in Schoenefeld near Berlin, March 18, 2022. Copyright Michael Sohn/Copyright 2022 The AP. All rights reserved
Copyright Michael Sohn/Copyright 2022 The AP. All rights reserved
By Euronews with AP
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Lawyers will debate whether the online retail giant exploited its market dominance.

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US regulators and 17 states are suing Amazon over allegations it abused its market position to inflate prices, overcharge sellers and stifle competition.

Amazon denies any wrongdoing. 

The lawsuit, filed Tuesday in federal court in Amazon's home state of Washington, is the result of a years-long investigation into the company's businesses and is one of the most significant legal challenges in its nearly 30-year history.

The Federal Trade Commission (FTC) and states mounting the lawsuit allege Amazon is violating federal and state antitrust laws. 

They are asking the court to issue a permanent injunction they say will prohibit the retailer from engaging in unlawful conduct and loosen its "monopolistic control to restore competition."

What is Amazon accused of doing?

The complaint accuses the company of engaging in anti-competitive practices with measures that deter sellers from offering lower prices for products on non-Amazon sites, an argument mirroring allegations made in a separate lawsuit filed last year by the state of California.

The lawsuit alleges Amazon buries listings offered at lower prices on other sites. At the same time, it also charges sellers high fees, forcing merchants to raise their prices on the platform, as well as on other e-commerce sites in order to keep their products competitive on Amazon.

"The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them," FTC Chairman Lina Khan said in a statement.

The lawsuit also claims Amazon degrades customers' experience by replacing relevant search results with paid advertisements, favouring its own brands over other products, while charging high fees that mean sellers can pay up to nearly half of their revenues to Amazon. 

According to the anti-monopoly organization Institute for Local Self-Reliance, the cut sellers give to Amazon from their revenue is up from 35% in 2020 and 19% in 2014.

Amazon denies any wrongdoing

Seattle-based Amazon.com Inc. said the FTC is "wrong on the facts and the law" and had departed from its role of protecting consumers and competition.

"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," Amazon General Counsel David Zapolsky said in a statement.

How big an influence has Amazon on the e-commerce market?

Some estimates show Amazon controls about 40% of the e-commerce market. 

A majority of sales on its platform are facilitated by independent sellers consisting of small and medium-sized businesses and individuals. 

In return for the access it provides to its platform, Amazon rakes in billions through referral fees and other services like advertising, which makes products more visible on the platform.

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Patrick Semansky/Copyright 2017 The AP. All rights reserved.
Packages pass through a scanner at an Amazon fulfillment center, Aug. 3, 2017, in Baltimore.Patrick Semansky/Copyright 2017 The AP. All rights reserved.

The vast majority of third-party merchants also use the company's fulfilment service to store inventory and ship items to customers. 

Amazon has been consistently raising fees for those reliant on the programme. More recently, it imposed — and then abandoned — another fee on some who don't, a move that was blasted by critics. 

Last quarter, Amazon reported $32.3 billion (€32.6 billion) in revenue from third-party services.

What is at stake for Amazon?

Consumer advocacy groups applauded the lawsuit, while an industry group said many large retail businesses have policies that mirror Amazon's.

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There has been speculation the agency would seek a forced breakup of the retail giant, which is also dominant in cloud computing and has a growing presence in other sectors, like groceries and health care. 

In a briefing with reporters, Khan dodged questions of whether that will happen.

"At this stage, the focus is more on liability," she said.

Amazon has long faced allegations of undercutting businesses selling on its platform by assessing merchant data and creating its own competing products that it then boosts on its site. 

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In August, the company said it was eliminating some in-house brands that weren't resonating with customers and would relaunch some items under existing brands like Amazon Basics and Amazon Essentials. 

AFP
Signs are displayed near the entrance during a media tour of the new Amazon headquarters in Arlington, Virginia, on September 20, 2023AFP

Booksellers and authors have also been urging the Department of Justice to investigate what they've called Amazon's "monopoly power over the market for books and ideas."

If successful, a court case could be a big boost for the FTC's Khan, a Big Tech critic who gained prominence as a Yale law student in 2017 for her scholarly work "Amazon's Antitrust Paradox." 

In 2021, Amazon sought to exclude her from agency probes against the company because of her earlier criticism.

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Under Khan's watch, the FTC has aggressively attempted to blunt Big Tech's influence but has been unsuccessful in some recent high-profile cases, including its bid to block Microsoft's takeover of the video game maker Activision Blizzard and Meta's acquisition of the virtual reality startup Within Unlimited.

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