Sources familiar with the situation have revealed that the Federal Trade Commission (FTC) is in the process of preparing an extensive antitrust lawsuit against tech behemoth, Amazon. This legal move, which is seen as one of the Biden administration’s most assertive actions against major tech companies, may result in Amazon’s reorganization and restructuring.
The FTC has been scrutinizing Amazon for quite some time, focusing on various aspects of the company’s operations. The lawsuit, which is expected to be launched as early as August, is set to question multiple business practices of the company. A successful case could lead to the restructuring of the company worth over a trillion dollars, shaping FTC Chair Lina Khan’s legacy.
Khan, who is known for her critical stance towards large tech companies, had pointed out Amazon’s monopolistic tendencies in her academic work back in 2017. However, any lawsuit will take considerable time to pass through the legal system, and the final decision will fall on the shoulders of her successors.
The specifics of the impending lawsuit remain uncertain, with last-minute alterations likely to occur. However, it’s evident that the FTC, including Khan, has taken a particular interest in certain Amazon practices.
The anticipated complaint is expected to focus on Amazon’s policies that the FTC argues restrict lower prices on competitor websites, along with policies pressuring merchants to utilize Amazon’s logistics and advertising services. Other areas under the microscope include Amazon Prime, which the FTC believes helps to illegally consolidate the company’s market dominance.
Preparations for the lawsuit have been ongoing since the end of the previous year, with the FTC expected to file the case in federal court.
The FTC’s investigation has involved interviewing numerous witnesses from both within and outside Amazon, such as CEO Andy Jassy and founder Jeff Bezos. The FTC has spent the last three years amassing a wealth of documents from Amazon and third parties to build a compelling case.
Amazon and the FTC have declined to comment on the matter.
Potential claims in the lawsuit are likely to be akin to existing cases pursued by the attorneys general in Washington, D.C., and California. These cases revolve around Amazon’s policy that demands third-party sellers to present their lowest prices on its platform, subsequently eliminating the opportunity for lower prices elsewhere.
Amazon has defended itself against these allegations by arguing that sellers determine their goods’ prices. While a Washington, D.C., judge dismissed the case, a California judge has decided to proceed with it.
Furthermore, the FTC is speculated to be targeting Amazon’s logistics services, suggesting that Amazon rewards sellers who use its services with better placement on its site while penalizing those who don’t.
Meanwhile, Amazon’s rapidly expanding digital advertising business is also predicted to come under scrutiny. The FTC is apprehensive that Amazon coerces merchants into purchasing ads for better placement in customer search results.
The investigation into Amazon was initiated during the Trump administration under former Chair Joe Simons, but was overshadowed by a separate probe into Facebook (now Meta). Khan revitalized the Amazon investigation soon after joining the FTC.
The recent losses the FTC experienced in its attempts to block corporate mergers have put additional pressure on the agency to bring a successful case against Amazon.
In response to the FTC’s actions, Amazon has requested Khan’s recusal based on her previous comments about the company and her past investigative work in the tech sector while working for the House Judiciary Committee. Filing the case in federal court will help avoid this issue.
The FTC could also collaborate with state attorneys general for the lawsuit, giving further reason to file in federal court. While no formal alliance against Amazon exists among the states, some could join the FTC’s case.
The final allegations will determine the states that join the lawsuit. Some states, as well as some within the agency, have expressed concerns about making Amazon’s Prime service a central issue of the case.
This is not the first time the FTC has taken legal action against Amazon under Khan. Recently, the company agreed to pay a $30 million settlement over privacy lawsuits involving its Ring doorbell cameras and Alexa smart speakers.
Before filing the lawsuit, the FTC will provide Amazon’s executives and attorneys with an opportunity to argue their case before the commissioners. This meeting, considered largely a formality, is expected to take place in August and is likely to be the final step before the case is filed.
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