FTC and 17 States File Antitrust Lawsuit Against Amazon in US Court

(Reuters) – A U.S. Federal Trade Commission lawsuit accusing Amazon.com of abusing its retail market power to stifle competition faces hurdles in court, testing the scope of U.S. antitrust laws and setting up hurdles for the agency, legal experts said.

The U.S. Consumer Agency, which oversees federal antitrust laws, and 17 states filed their lawsuit against Amazon in federal court in Seattle on Tuesday, asking a U.S. judge to consider an injunction and other penalties to combat the alleged illegal activity.

Several legal experts told Reuters the FTC faces a high bar in trying to show that US consumers would be better off in a world without Amazon’s policies.

According to the lawsuit, Amazon has unfairly favored its own products and that the company’s policy punishes merchants who want to sell products cheaper on other platforms.

Under US law, the FTC has the burden of proving that Amazon is not only a large market player with power, but also that it has engaged in illegal activities to acquire or maintain its dominant position. The agency must also define and prove a relevant market, which is a key threshold issue.

Antitrust lawyer David Balto, the FTC’s former policy director, described the FTC’s rampage as an attempt to get over Mount Rainier in Washington state in tennis shoes.

“You know, it’s conceivable — you could get to the top — but it’s 20,000 feet and it’s going to be really cold,” he said.

As part of the case, Amazon will have the opportunity to make pro-competitive arguments for its alleged conduct, said Foley & Lardner antitrust lawyer Diane Hazel. Hazel said Amazon would have to show its reasons are “legitimate” to counter the FTC’s claims.

Amazon’s argument, said Tom Cotter, an antitrust researcher at the University of Minnesota Law School, is “We offer consumers access to a wide variety of goods at reasonable prices quickly.”

In fact, David Zapolsky, Amazon’s general counsel, said in a statement that the challenged practices have “helped spur competition and innovation in the retail industry.” Zapolsky said the FTC’s complaint pretends that “everyday retail competition doesn’t exist.”

FTC Chairwoman Lina Khan said in a statement that Amazon used “punitive and coercive tactics” to illegally maintain its monopoly.

The FTC’s lawsuit is related to, but broader than, a series of private consumer cases filed against Amazon in recent years that are pending in the same U.S. federal court.

The private antitrust cases provide an early window into some of the legal arguments Amazon can be expected to make to challenge the FTC’s suit.

In one case, a potential class-action lawsuit challenging the platform’s pricing policies, Amazon’s lawyers argued that no court “has ever condemned a business practice that requires low prices at retail for consumers.”

Amazon is also fighting claims from another private civil lawsuit alleging the company stifled competition in shipping and delivery services.

U.S. District Judge Ricardo Martinez dismissed that lawsuit in April, saying the consumer plaintiffs were not buyers of logistics services. But the court allowed consumers to file a new case.

Martinez, an appointee of former U.S. President George W. Bush, could be assigned to the FTC suit because the agency said several of the Amazon cases he is handling are factually and legally related to the new suit.

In general, U.S. judges are “wary of using antitrust laws to punish cheap pricing,” said competition researcher Sean Sullivan of the University of Iowa School of Law.

Sullivan said it’s not always a clear line between “good low pricing” — which is based on market competition — and “bad low pricing,” which helps a company gain or maintain market power.