A Clash of Titans: FTC Chair Lina Kahn Takes on Amazon

Technology Policy Brief #98 | By: Mindy Spatt | October 11, 2023

Photo taken from: bloomberg.com

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As a law student Lina Kahn authored a widely respected critique of Amazon’s market power.  Now that she’s chair of the Federal Trade Commission will she be able to do something about it?

Analysis

A suit filed by the Federal Trade Commission (FTC) and 17 states charging Amazon with anticompetitive strategies and unfair monopoly power was not a surprise, given FTC Chair Lina Kahn’s longstanding criticisms of the company.  (See Technology Policy Brief #69 California Joins the Antitrust Chorus Against Amazon).  The allegations in the suit, filed on September 26, center around a series of practices that the FTC alleges allow Amazon to  “stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.”

One example is the Buy Box, a feature on Amazon’s site that recommends products to customers.  Sellers interviewed by modernretail.com reported that inclusion in the Buy Box is essential to their success on Amazon.  But the FTC says Amazon blocks sellers whose prices the company does not approve of, severely limiting access.

Other practices cited by the agency include tactics that punish sellers who offer lower prices on other platforms than they do on Amazon, pressuring sellers to purchase Amazon’s advertising services, inserting paid advertisements for Amazon’s own products in search results and charging exorbitantly high fees to sellers..  According to the FTC, these practices prevent price and product competition and prevent sellers from attracting a robust customer base.

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said FTC Chair Lina Khan in a press release. “[A]mazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them. Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”

Numerous commentators have suggested that the suit does not have good chances because Amazon’s overall market share, 38% of online sales overall, is well below the level that courts consider unfair, which is traditionally 60% or above.  But there are several ways to look at Amazon’s market share.  The FTC maintains that the barriers to entry it creates for other sellers are evidence of Amazon’s monopoly power.  It also uses Gross Merchandise Value to measure Amazon’s market power.  By that measure, the total value of goods sold to customers during a given time period, the FTC  claims Amazon has more than 69% of the market share of the top 4 general merchandise platforms (Walmart, Target and eBay are the others).

The FTC concludes that “Amazon’s illegal, exclusionary conduct makes it impossible for competitors to gain a foothold. With its amassed power across both the online superstore market and online marketplace services market, Amazon extracts enormous monopoly rents from everyone within its reach,” and seeks immediate relief from the court in the form of an injunction to stop these practices.  A breakup of the company is widely seen as unlikely, but the Commission might succeed in reigning in some of the most egregious practices detailed in the complaint.

Engagement Resources:

 

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