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Amazon is a big company, and that makes it a big target for the FTC. After recent rumors about a potential legal battle, it’s been confirmed that Amazon is facing a massive lawsuit from the FTC and 17 US states, according to the FTC itself. There are some pretty tough charges going against Amazon, and the consequences could heavily affect the company.
Amazon is facing a massive lawsuit from the FTC
So, what is this case about? FTC Chair Lina M. Khan alleges that the e-commerce company has been using its power, money, influence, and anticompetitive practices to stifle competition while raking in more money. Along with the FTC, 17 Attorneys General are also jumping in on this case.
Basically, it’s a big company that wants to stay big, and it’s doing so at other companies’ expense, according to Khan. “Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said Kahn in a statement.
Some of the charges include harshly punishing stores that offer prices lower than Amazon’s own products. If a store offers prices lower than what Amazon charges, its products are extremely deprioritized in the algorithm.
The company has also been conditioning sellers’ ability to make their products eligible for Prime. This makes it harder for sellers to offer their products on other services, which is pretty suffocating for them.
Amazon is a huge company, and that leads to some issues
The fact that Amazon is the largest e-commerce company on the face of the planet means that it’s able to perform certain predatory and unethical practices with the sellers who rely on it, according to the lawsuit.
The FTC has been looking to take Amazon to court for some time. In fact, rumors have been swirling around recently stating that the FTC was looking to sue the company.
This case targets two parts of Amazon’s business. It’s going after the online superstore market, which is responsible for selling products to customers. Also, it’s going after the market for online marketplaces.
What did Amazon do?
It alleges that Amazon is able to charge outrageous fees to its sellers. This includes a monthly seller fee and a fee for advertisement. These are required for sellers to keep their stores on Amazon, and they sometimes cost sellers up to 50% of their total revenue.
Next, Amazon is accused of biasing its own products in the search results. This means that people are always likely to see Amazon’s products whether or not they’re the best fit for the search results.
Amazon is also accused of “Degrading the customer experience” by serving up paid advertisements instead of organic search results. People are seeing ads first and foremost rather than the organic results. This hurts the sellers who aren’t paying for ads.
Also, the lawsuit alleges that Amazon is pushing a ton of junk ads onto the customers. This practice makes navigating the site frustrating for customers looking to buy the products.
What states are involved
The states suing Amazon along with the FTC are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.
What will happen if the company loses?
Right now, the FTC is proposing a permanent injunction on Amazon to stop its wrongdoings. This would prohibit the company from performing the practices outlined in the case.
If Amazon is found guilty, then the company would have to make some massive changes to its business. Rumors pointed to the FTC wanting to break up the company, but we didn’t see any mention of that in the filing. We don’t know if the FTC would pursue that action if Amazon isn’t compliant with the injunction.
Right now, this case is still ongoing, and it might go on for some time. For all we know, it could be bigger than the case with Microsoft trying to buy Activision Blizzard. This means that we might not see an end to it anytime soon, so you’ll want to stay tuned.