FTC and 17 States Take on Amazon: Alleged Exploitative Monopoly Impacting Sellers and Consumers

Amazon FTC

After a prolonged period of alleged unfair treatment towards affiliate marketers by Amazon nothing happened and many online marketers slaved away for Amazon. But if you own both Amazon and The Washington Post – then might makes right? Well, finally, the Federal Trade Commission (FTC) along with attorneys general from 17 states have taken action.

The issue that was overlooked for years, revolve around accusations have long circulated that Amazon permitted affiliate marketers to boost traffic, only to then capitalize on this by selling ads to these visitors without passing on any of the revenue. But now, the collective legal effort focuses on something that affects sellers and consumers. It argues that such practices demonstrate Amazon’s exploitation of its market dominance at the expense of both consumers and marketplace sellers.

FTC Chair Lina Khan expressed the commission’s concerns, alleging Amazon’s engagement in numerous oppressive and forceful strategies to illegitimately sustain its monopolistic standing. The complaint elaborates on Amazon’s exploitation of this dominant position, enriching itself while simultaneously increasing prices and diminishing the quality of service for countless American families and numerous businesses dependent on the Amazon platform.

According to Adriaan Brits, CEO at Sitetrail which powers ecommerce small business owners: “….we advised many ecommerce companies to pivot away from Amazon dependence, but it is hard when they have a giant share of the market – and providers like Shareasale do not offer value to 90% of affiliates and retailers who try to use them. If the FTC does not intervene with concrete measures, being at the behest of Amazon with a bit of diversification into TikTok, Facebook and Instagram, remains a reality for many ecommerce providers. It is also my view that Fiverr and Upwork poses a similar risk in the B2B space and this will also need to be addressed by the FTC, sooner rather than later…” 

The FTC pinpointed several controversial tactics adopted by Amazon, including substituting organic search results with paid advertisements and favoring its products despite knowing other available products are superior. Amazon’s substantial fulfillment and other associated fees, coupled with their insistence on sellers’ eligibility for its Prime program, have been deemed as contributing factors to heightened prices for consumers.

These practices compel many sellers to part with almost half of their total revenues to Amazon, inadvertently leading to inflated prices for numerous products both on and off the Amazon platform. The anti-discounting policies, particularly the de-prioritization of sellers offering lower prices outside of Amazon, have also drawn criticism from the FTC.

In a concerted effort to restore competition and halt Amazon’s alleged unlawful conduct, a permanent injunction is being pursued by the FTC and the participating states. Despite these serious legal challenges, Amazon remains steadfast in its defense. David Zapolsky, Amazon’s General Counsel, asserts that their practices have in reality catalyzed competition and innovation within the retail industry, benefiting consumers and businesses alike. He forewarns that the FTC’s efforts, if successful, would inadvertently lead to reduced product choices, increased prices, delayed deliveries, and diminished opportunities for small businesses, ironically contradicting the intended objectives of antitrust law.

However, the assertion of Zapolsky fails to acknowledge the tangible harm being inflicted on small and medium enterprises (SMEs) and retailers. The steep fees that Amazon imposes on sellers, which can consume close to 50% of their total revenues, heavily undermine the financial stability of these businesses, leaving them with meager profits and scant resources for growth and expansion. Furthermore, Amazon’s alleged prioritization of its own products and the use of anti-discounting measures create an unfair playing field, making it exceptionally challenging for other sellers to compete. Small retailers, unable to bear the brunt of these high fees and restrictive practices, are finding it increasingly difficult to sustain their businesses, thereby reducing the diversity and richness of the marketplace. The overshadowing dominance of Amazon, coupled with its alleged anticompetitive practices, is suffocating smaller enterprises, stunting competition rather than fostering it as claimed.