The FTC launched a lawsuit against Amazon on September 26. The suit’s basis implies that Amazon has an illegal e-commerce monopoly in the United States. Wrongful practices exemplified in the case document include allegedly hiking rates for sellers on Amazon who utilize their fulfillment services. These businesses are usually smaller in scale when they utilize Amazon’s fulfillment and would not be able to survive without the service. Therefore, small-scale sellers had no option but to pay the hiked rates. Additionally, the FTC accuses Amazon of suppressing competition and using an algorithm titled ‘Project Nessie,’ which enabled Amazon to conduct unethical practices.
The case document states that Amazon can suppress competition effectively due to its massive scale, leveraging its size to make small to mid-sized companies unable to compete. If sellers tried to sell products lower than Amazon, Amazon could bleed costs on products to take that seller's business for the given product. In some cases, sellers who infringed on Amazon’s pricing and sold on the platform would be removed as a result. Amazon search results are accused of being anti-competitive, as results can be skewed based on sellers who pay to have advertising placements on the site. The case introduced the previously unknown aspect of Amazon’s alleged anti-trust behavior called ‘Project Nessie.’ Nessie was an algorithm (reportedly no longer being used) that could see buying trends across the online retail landscape and adjust Amazon pricing accordingly. It inflated pricing to maximize profits without online shoppers noticing the increases. If other sellers (like Walmart) were to change their prices based on the inflated rate, Nessie would leave the inflated pricing on Amazon, and the market would holistically be selling that product at a premium. If another seller sold that same product at a lower rate and it sold competitively, Nessie would readjust the pricing back to normal.
This legal action against Amazon is due to new leadership within the FTC. Lina Khan, a 32-year-old lawyer and Associate Professor at Columbia, was appointed new commission chair in March 2021. As her term concludes in September 2024, she is spending the remaining time she has to address her concerns about emerging tech monopolies and pursue related cases. These charges against Amazon may be unsuccessful, as recent anti-trust charges against Meta and Microsoft were dismissed. Today, Amazon’s market share of e-commerce in the United States is roughly 40%.
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