Vorys eControl’s Take on the September 26 Federal Trade Commission and State Antitrust Lawsuit Against Amazon
What is happening?
On Tuesday, September 26, 2023, the Federal Trade Commission (“FTC”), along with seventeen states, sued Amazon in the United States District Court for the Western District of Washington, alleging Amazon has engaged in unfair and anti-competitive business practices to maintain a monopoly. The lawsuit is not a surprise to Vorys eControl, as the FTC has been investigating Amazon for years and has been publicly telegraphing that this lawsuit was imminent.
Which States have joined the lawsuit?
The seventeen states that have joined 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 violations does the FTC allege Amazon to have committed?
The complaint alleges six counts for violation of federal antitrust law, and fourteen counts for violating various state laws.
What specifically is Amazon accused of doing?
The complaint alleges, generally, that Amazon has engaged in anti-competitive actions that have inflated prices for consumers and harmed the third-party sellers on the Amazon marketplace.
The FTC’s complaint primarily focuses on two practices it says are anticompetitive:
(1) Amazon tries to manipulate prices. The complaint alleges that Amazon has implemented price control measures on its sellers that “suppress price competition and push prices higher across much of the internet by creating an artificial price floor and penalizing sellers that offer lower prices off Amazon.” (emphasis added). The complaint also explains that Amazon’s “fair pricing agreement” requires sellers not to offer their products for “significantly” less on other platforms or websites. This means that consumers are actually paying higher prices, both on Amazon, but also on other platforms and potentially in brick and mortar stores. There is also a heavily redacted section addressing Amazon’s attempt to prevent 1P sellers from selling to Amazon’s perceived competitors at lower prices.
(2) Amazon tries to force sellers to use Fulfillment by Amazon. The complaint alleges that “Amazon coerces sellers into using its fulfillment service to obtain Prime eligibility and successfully sell on Amazon.” The complaint alleges that many sellers pay nearly 50% of their revenue to Amazon when all of the fees are combined.
In addition, the FTC complains that Amazon has increased the numbers of ads in search results, making it difficult for consumers to find organic search results, and which steer consumers towards more expensive products.
Does the lawsuit seek to stop the sale of poor quality and counterfeit goods on Amazon?
No, the focus of the lawsuit is not on any of the brand protection issues we confront on a daily basis so it is not anticipated to obviate the need for a brand’s eControl Program or brand protection strategy.
What does the Federal Trade Commission hope to accomplish with this lawsuit?
The FTC has stated that its focus now is on liability, and has not sought the relief from the court that would lead to “breaking up” Amazon, as has been speculated in the press. Instead, it is seeking a declaration that Amazon has committed the anti-competitive actions alleged and is asking the Court to permanently prohibit Amazon from engaging this conduct.
Has Amazon responded to the lawsuit?
On Tuesday, September 26, 2023, Amazon released a statement: “We fundamentally disagree with the FTC’s allegations—which are in many cases wrong or misleading—and with their overreaching and misguided approach to antitrust, which would harm consumers, hurt independent businesses, and upend long-standing and well-considered doctrines.”
How long will it be before this case is resolved?
Realistically, it will likely be years before this case is resolved.=
What does this lawsuit mean for Amazon, sellers, and consumers in the meantime?
Essentially, nothing. Amazon has not announced any changes to its policies. Ultimately, Amazon may decide to alter its policies to align with the FTC’s understanding of the law and, while this could impact the relationship sellers have with Amazon regarding pricing and fulfillment, this is extremely unlikely to happen any time soon.
About Vorys eControl: Vorys eControl is an interdisciplinary team of lawyers, brand protection professionals, investigators, technologists and data analysts that designs, implements and executes online sales control solutions focused on driving brand growth and brand value. Vorys eControl has helped more than 1000 brands, including some of the world’s largest companies across numerous product categories, to stop unauthorized sales, diversion and infringements, mitigate channel conflict and preserve brand value in today’s eCommerce age. Learn more at vorysecontrol.com. For additional details on Vorys eControl, please reach out to Daren Garcia at email@example.com.
For more information on this lawsuit, please contact Martha Motley or Kara Mundy.