A reported “last rites” meeting for Amazon with the three members of the Federal Trade Commission last week signals that a case against the online retail giant may be imminent.
The FTC has been investigating the $1.4 trillion online retailer, movie studio owner, primary care medical provider, Whole Foods grocery store holder, and cloud services company for years, but details for the forthcoming case have not been made public.
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Moreover, FTC Chairwoman Lina Khan is a longtime Amazon antagonist. She wrote an influential paper as a Yale Law School student, “Amazon’s Antitrust Paradox,” which argued that the current American antitrust law framework has focused too much on keeping consumer prices down at the expense of alleged monopolistic practices. Amazon is, forgive the wordplay, a prime example of the problem, in Khan’s view.
One issue for regulators would be “price parity.” That is, up until 2019, Amazon prevented third-party sellers in its online marketplace from offering lower prices in other selling venues. That year the company changed its policy to ban sellers from “setting a price on a product or service that is significantly higher than recent prices offered on or off Amazon.” If sellers violate this policy or charge inflated shipping costs, they may be subject to a truncated “buy box” being displayed alongside their product, which displays purchase options. This adds one extra step in purchasing the product and is significant because 82% of sales happen in the box.
In explaining the terms of the price parity arrangement, Amazon states that it “strives to provide (its) customers with the largest selection at the lowest price.” Critics of the policy, like the attorneys general of the District of Columbia and California, charge that price parity results in customers paying artificially higher prices.
Perhaps also at issue is the platform’s “self-preferencing” practices. Critics charge that Amazon unfairly advantages itself when it competes with third-party sellers in offering similar items. Specifically, the accusation is that Amazon favors the search results with offers from its in-house brand, Amazon Basics, over those of third-party sellers. This practice would have been banned by the American Innovation and Online Choice Act, which failed to pass in Congress last session.
Defenders of the practice argue that the Amazon Basics line offers more choices for consumers and often a lower price, free and expedited shipping.
Most recently, the FTC’s Consumer Protection Bureau filed charges against Amazon for using “manipulative, coercive, or deceptive user-interface designs known as ‘dark patterns’ to trick consumers into enrolling in automatically renewing Prime subscriptions.” The company’s sheer size and market power, with wildly successful services like Prime, may factor into the upcoming case.
The current FTC has put Big Tech in its crosshairs with cases against Meta, Google, and Microsoft. Efforts are ongoing against Meta’s 2012 $1 billion purchase of photo-based social media app Instagram, while one challenging Meta’s acquisition of fitness virtual reality startup, Within, was lost in court. A case challenging Google’s contracts with device manufacturers to be the default search option on products is set to start trial next month. The agency’s effort to block Microsoft’s purchase of video game maker Activision Blizzard, maker of the popular game Call of Duty, also failed in court this summer. All the attempts reflect the current FTC commissioners’ skepticism of large companies and their impact on competitors, workers, and competition dynamics.
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One question for the FTC with the forthcoming Amazon case is if Khan will recuse herself. Because the FTC acts as both prosecutor and judge in its in-house administrative courts, Khan’s past publicly expressed opinions about the company’s practices could violate Amazon’s right to due process. Khan rose to prominence in the antitrust field by authoring that law school paper asserting Amazon was harming competition. She then went on to craft a report about the market dangers of large tech companies while working as a committee counsel in the House of Representatives. Amazon has filed a petition asking her to recuse herself from any future cases against the company.
If the FTC case is successful, remedies range from barring certain business practices at issue, like price parity or self-preferencing, to structural remedies, like breaking up the company. That would be the biggest antitrust measure ever taken against Big Tech.
