Is the FTC’s Antitrust Lawsuit a Threat to Amazon?

With the arrival of the Federal Trade Commission’s long-awaited antitrust lawsuit, Amazon has to defend itself against charges alleging that its massive platform has blocked competition, with the result being higher prices and less choice for consumers as well as increased costs for third-party sellers.

The complaint states that Amazon is able to maintain its alleged monopoly power in part due to the pricing tactics involving third-party sellers, particularly access to the platform’s “Buy Box,” or the real estate next to an item’s listing highlighted by prompts to “Buy Now” or “Add to Cart.”

The Buy Box, seen as a major driver of sales, is removed if Amazon finds the item cheaper on another website. The FTC charges, “Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.”

The FTC claims that third-party sellers are then coerced into keeping their prices high on other sites to retain the Buy Box, effectively raising prices for consumers and making it harder for other sites to compete on price.

Beyond pricing, the FTC asserts that Amazon coerces sellers into using its fulfillment service because that’s the only way their product listings obtain the “Prime” mark indicating fast and free delivery to Prime members. The “Prime” logo next to an item is also a major sales driver.

It’s often too costly for a seller to build another fulfillment network to support sales to other platforms, according to the FTC. “This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon,” the agency said.

In response, Amazon inferred that the FTC misunderstands how the retail industry operates and how its tactics benefit consumers and sellers.

In a statement, David Zapolsky, Amazon’s SVP of global public policy and general counsel, said of Amazon’s policy over Buy Box access, “Just like any store owner who wouldn’t want to promote a bad deal to their customers, we don’t highlight or promote offers that are not competitively priced. It’s part of our commitment to featuring low prices to earn and maintain customer trust, which we believe is the right decision for both consumers and sellers in the long run.”

He also wrote that Amazon’s logistics services are optional, and many sellers find success without them. Sellers often choose to use them, he states, because of the significant savings they can offer — fulfillment fees are an average of 30% less expensive than standard shipping methods — and because “Amazon takes care of so much of the heavy lifting of logistics.”

Finally, the FTC’s complaint, according to Amazon, undervalues competition from physical stores, which still account for more than 80% of retail sales. Zapolsky wrote, “All of that competition leads to low margins for retailers, but lots of options for sellers to sell their products and better prices for customers wherever they choose to buy.”

The case, expected to last several years, comes as Amazon continues to maintain a strong reputation with consumers across surveys as well as with the majority of third-party sellers. According to Jungle Scout’s 2022 State of the Amazon Seller Report, 72% of sellers feel Amazon is a good company for the business owners that use its platform, with 82% optimistic that selling on Amazon will be a viable way to make money online in the future.