Delaware’s attorney general has joined a Federal Trade Commission lawsuit against Amazon over its pricing and fulfillment services, pitting the state’s top prosecutor against one of its major employers. | DBT PHOTO BY JACOB OWENS
WILMINGTON – The Federal Trade Commission filed its long-awaited antitrust lawsuit against e-commerce giant Amazon on Tuesday, and Delaware was among 16 states joining the federal consumer protection agency in its litigation.
Led by FTC Chair Lina Khan, who catapulted to the heights of antitrust law after writing a heralded academic paper that essentially laid out the monopoly case against Amazon, the plaintiffs are seeking to break the company’s hold on its massive online marketplace.
The case boils down to two major complaints: that Amazon punishes sellers for discounting its products elsewhere on the internet, and that Amazon requires sellers to meet its Prime service obligations to use its fulfillment services, adding anti-competitive costs to their businesses.
Through those tactics, the FTC alleges Amazon has established an e-commerce monopoly that subsequently allows it to reap additional benefits by boosting paid listings, biasing its own products in searches, and charging seller fees that could total nearly half of their total revenue on the site.
Delaware Attorney General Kathy Jennings has joined the antitrust lawsuit against Amazon over its pricing and fulfillment services. | DBT PHOTO BY JACOB OWENS
Delaware Attorney General Kathy Jennings has not shied away from major federal antitrust cases, joining those against Google over its search practices and a coalition of drugmakers over alleged price fixing in the past few years.
“Amazon’s exclusionary practices simply cannot be allowed to continue,” she said in a statement. “Our households, creators and entrepreneurs, and indeed our free market are being unduly strained and stifled. We will work to hold Amazon accountable.”
The case does pit Delaware’s top prosecutor against one of its major employers though, with Amazon now ranking the fifth largest in the state with more than 7,000 employees working at fulfillment and delivery centers. Jennings has not shied away from those scenarios either, settling a lawsuit with DuPont legacy companies over environmental concerns in 2021.
According to the FTC and plaintiff states, “Amazon has violated the law not by being big, but by how it uses its scale and scope to stifle competition.”
“Amazon uses a set of anti-discounting tactics to prevent rivals from growing by offering lower prices, and it uses coercive tactics involving its order fulfillment service to prevent rivals from gaining the scale they need to meaningfully compete. Amazon deploys this interconnected strategy to block off every major avenue of competition — including price, product selection, quality, and innovation — in the relevant markets for online superstores and online marketplace services,” the lawsuit alleges. “According to an industry source, Amazon now captures more sales than the next 15 largest U.S. online retail firms combined.”
In a lengthy statement issued shortly after the lawsuit was filed, Amazon said the “misguided” lawsuit was a “radical departure” from the FTC’s traditional focus.
“The FTC’s complaint alleges that our pricing practices, our Fulfillment by Amazon offering, and Amazon Prime are anticompetitive. In so doing, the lawsuit reveals the commission’s fundamental misunderstanding of retail,” wrote David Zapolsky, general counsel and executive vice president of global public policy for Amazon.
The company argues that many of the options deemed “coercive” by the FTC are in fact optional, with many sellers choosing not to utilize them, and that its search feature is made in the best interest of its consumers.
“The FTC’s case alleges that our practice of only highlighting competitively priced offers and our practice of matching low prices offered by other retailers somehow lead to higher prices. But that’s not how competition works. The FTC has it backwards and if they were successful in this lawsuit, the result would be anticompetitive and anti-consumer because we’d have to stop many of the things we do to offer and highlight low prices — a perverse result that would be directly opposed to the goals of antitrust law,” Zaplosky argues.
Attention on the case filed in the U.S. District Court in Seattle will be high, especially as an emboldened FTC under Khan has yet to score a major antitrust victory. It lost a big case against a merger between Microsoft and video game developer Activision earlier this year, as well as a smaller tie-up between Facebook parent company Meta and virtual reality startup Within.
A federal judge will decide whether Amazon should be liable for damages due to its practices and whether “structural remedies,” including limits on its operations or even some kind of corporate break-up, are necessary to end a monopoly.
Also joining the Amazon suit with Delaware are Connecticut, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.
