Amazon Accused of Antitrust Violations in Lawsuit by Federal Trade Commission

In late October 2021, Fred Ruckel, the sole seller of the popular cat toy called the Ripple Rug on Amazon, received an automated email notifying him that his product would no longer be featured in Amazon’s buy box because it was being sold at a lower price elsewhere. This move would cost Ruckel thousands of dollars per day. Unbeknownst to him, Chewy, another retailer, had lowered the price of his product to $39.99, cheaper than the $43 offer on Amazon. Despite the fact that the item on Chewy was actually more expensive due to shipping and taxes, Amazon’s algorithm flagged it as a lower offer. Ruckel had to decide whether to lower the price on Amazon or ask Chewy to raise the price, and he chose the latter.

The Federal Trade Commission’s Lawsuit

Almost three years later, Ruckel’s experience reflects the core allegations made by the Federal Trade Commission (FTC) in a sweeping antitrust lawsuit against Amazon. The FTC accuses Amazon of using its monopoly power to squeeze merchants and hinder competitors, resulting in inflated prices and a degraded shopping experience for consumers. The agency claims that Amazon relies on an “anti-discounting strategy” and a “massive web-crawling apparatus” to stifle competition. According to the FTC, Amazon punishes third-party sellers who offer lower prices elsewhere by threatening to disqualify them from appearing in the buy box. Losing the buy box poses a significant threat to sellers’ businesses.

The FTC argues that Amazon’s tactics lead to elevated prices across the web. The company raises fees for sellers and prevents them from offering discounts on other platforms, causing sellers to inflate their prices off of Amazon. This creates an “artificial price floor everywhere,” according to the complaint. The FTC seeks to hold Amazon accountable for violating anti-monopoly laws, although specific remedies have not yet been outlined.

Amazon’s Response

In a blog post, Amazon’s general counsel, David Zapolsky, stated that third-party sellers set their own prices on the marketplace. He also mentioned that the company invests in tools to help sellers offer competitive prices. Zapolsky argued that the FTC’s lawsuit could result in Amazon no longer highlighting low prices, which would be contrary to the goals of antitrust law.

Mixed Reactions from Sellers

On Amazon’s merchant forum, called Seller Central, some users expressed support for the FTC’s lawsuit, hoping that it would lead to changes in Amazon’s business practices. Sellers have long had grievances with Amazon, including rising fees, a complex suspensions process, and increased competition on the platform. However, others believe that the FTC’s complaint is misguided and that selling on Amazon provides significant opportunities.

Sellers’ Concerns

Sellers who may agree with regulating Amazon still have concerns about whether the FTC’s highlighted issues would actually improve the seller and consumer experience. Some sellers feel that Amazon’s fulfillment service, Fulfillment by Amazon (FBA), offers valuable benefits, such as competitive pricing and fast shipping. They argue that using FBA is not coercive but rather makes their businesses easier and more effective. Additionally, sellers have seen improvements in their ability to communicate with buyers and target ads on Amazon’s platform.

While some sellers believe that Amazon once had a monopoly, they argue that the landscape has changed with the rise of competitors like Shopify, Walmart, and Chinese e-commerce companies. These alternatives have provided more options for sellers, reducing Amazon’s dominance. However, opinions remain divided, and sellers recognize the complexity of the case.