The Federal Trade Commission filed a major lawsuit against Amazon Inc. late September, accusing the company of using “coercive and punitive tactics” to maintain a monopoly over the online marketplace.
Attorney General Keith Ellison and 16 other state attorneys general have joined the lawsuit, and together, they are seeking a permanent injunction which requires Amazon to change how it conducts business.
The lawsuit alleges that Amazon uses exclusionary contracts to force sellers from expanding to other websites. It further alleges that the company purposefully pushes anti-discounting measures. For example, the lawsuit states that Amazon monitors product prices across the Internet and will punish sellers if they list products for cheaper on other platforms.,. Amazon then drives sellers to use Amazon’s costly Prime fulfillment service, further cementing Amazon’s position as the only viable, yet expensive, platform to use.
“There's always a certain irony with these kinds of monopoly lawsuits or trust busting, which [is] they've gotten so large that they are crowding out the type of competition innovation through which they originally came into existence,” said Tyler Schipper, an economics professor at University of St. Thomas. Schipper said the end result is a developed firm that’s fighting to maintain its place in online consumerism.
Essentially, the FTC is accusing Amazon of punishing sellers who use any other platform, and subjects the ones who do follow their rules to steep price hikes and fees. According to the lawsuit,“Amazon has hiked so steeply the fees it charges sellers that it now reportedly takes close to half of every dollar from the typical seller that uses Amazon's fulfillment service.” In order for sellers to be eligible for Amazon Prime benefits, which include better shipping, visibility through its search engine, and better control over refunds and returns, they must use Amazon’s fulfillment service.
Those punitive measures taken by the sellers are causing the sellers to raise their prices everywhere in order to make up the difference without running aground Amazon’s seller policy.
"Markets should be fair for all businesses and all consumers, and whether you're buying necessities or trying to make a living, everyone deserves the benefits of healthy competition - including fair prices when you're shopping, and reasonable fees when you're doing business,” Ellison said in a statement.
Despite the formidable amount of legal power behind the FTC, Schipper says that it could be quite some time until actual change is made. He also voiced concerns about how the lawsuit could impact Amazon’s fulfillment center workers. Amazon employs over 157,000 people in Minnesota, and over 1.1 million people in the U.S.