FTC Faces Lengthy and Difficult Road Ahead with Amazon Antitrust Lawsuit

With a lawsuit looming over its operations, Amazon is approaching Prime Day, one of its largest sales events of the year. The lawsuit alleges that the company is obstructing sellers from offering their products at lower prices on alternative platforms.

The Federal Trade Commission’s long-awaited antitrust case is the agency’s most aggressive move yet to curb Amazon’s market power. The company has become synonymous with online shopping and fast deliveries.

Under Chairman Lina Khan, the agency has not been shy about taking big swings at some of America’s biggest companies and testing the limits of antitrust law to reverse what many of her supporters see as decades of weak antitrust enforcement. But that approach has also led to some high-profile setbacks, most notably the FTC’s effort to block Microsoft’s takeover of Activision Blizzard and Meta’s purchase of virtual reality startup Within Unlimited. The FTC is appealing the judge’s decision in the Microsoft case.

Amazon’s case, which was supported by 17 states, marks a full-circle moment for Khan, who is finally facing off against a company he studied in an influential scholarly paper he wrote as a Yale law student. In a paper called “Amazon’s Antitrust Paradox” published in 2017, Khan argued that the prevailing way of looking at antitrust by its effect on prices was inadequate in today’s economy. Instead, he argued for a more progressive approach that examines the effects of corporate concentration on broader markets.

Two years ago, President Joe Biden tapped Khan to lead the FTC, whose administration has taken a tougher stance on antitrust enforcement. That same year, Amazon tried to get him fired from agency investigations against the company, claiming he was too biased.

Now his agency must prove in court that Amazon is both a monopoly and using its dominant position to prevent competition from flourishing in the market.

“If we succeed, competition will return and people will benefit from lower prices, better quality and more choice,” Khan said on a recent call with reporters.

A final decision in Amazon’s case will likely be years away, assuming the lawsuit is not dismissed under the new administration, dismissed by a judge or reached a settlement similar to the one Amazon reached last year with European regulators. A similar lawsuit filed by the state of California last year is scheduled to go to trial in 2026. The District of Columbia also tried to sue Amazon on antitrust charges earlier, but a federal judge dismissed that lawsuit last year.

Experts say the FTC faces a few hurdles in its own case, including convincing a court what part of the market Amazon is allegedly monopolizing.

In a 172-page complaint filed in federal court, the government paints a picture of an institution that arms sellers and exercises monopoly power in “online shopping markets” and “online shopping services.” This is not the entire US e-commerce sector, of which Amazon is estimated to control about 40 percent. Instead, the agency describes single-target online stores that offer a large selection of products and allow sellers to access a significant number of buyers.

In a blog post responding to the lawsuit, Amazon general counsel David Zapolsky accused the FTC of “gerrymandering the purported market” to portray Amazon as something it is not. He said consumers buy more than 80 percent of all retail products in brick-and-mortar stores and that Amazon was “just a piece of a massive and robust retail market” that offers options for consumers and sellers. According to him, regular retailers, Verkkokaupats and newer online shopping-pick-up options compete fiercely with each other.

On the web, Amazon has faced growing competition from traditional retailers such as Walmart, as well as Chinese shopping sites Shein and Temu, which became popular by offering ultra-cheap products. There are also platforms like Etsy and Shopify that allow small businesses to sell directly to consumers, and specialty retailers like Wayfair.

“Everywhere you look, there are companies competing with Amazon,” said Neil Saunders, CEO of GlobalData Retail.

Beyond the jargon of market definitions, the content of the agency’s complaint focuses on Amazon’s growing payments from third parties and its impact on consumers. It accuses the e-commerce company of squeezing sellers through various fees and using a massive web crawler that penalizes them for offering lower prices on other sites. The FTC also alleges that Amazon keeps sellers dependent on services that have allowed it to rake in billions in revenue each year.

Zapolsky counters that Amazon — just like any store owner who doesn’t want to promote bad deals — doesn’t highlight listings that aren’t competitively priced. He also said that the services offered by the company to sellers are optional.

The Amazon case comes as federal prosecutors and state attorneys general are in the middle of a 10-week trial trying to prove that Google rigged the market in its favor by locking its search engine as the default in many places and devices. The case, brought by the Justice Department, is the largest U.S. antitrust lawsuit since regulators went after Microsoft and its dominance of personal computer software a quarter-century ago.

Maurice Stucke, a former senior counsel at the agency during Khan’s tenure, said that while there have been some notable antitrust cases, there hasn’t been as much antitrust case law in recent decades, limiting the examples the FTC can draw from in its Amazon lawsuit. And even if the FTC wins the case years later, he said, changes in the market could allow Amazon to maintain its dominance without taking the actions the agency alleges.

“When you get relief, it can be too little too late,” said Stucke, who currently teaches law at the University of Tennessee.

Khan, meanwhile, has dodged questions about whether the agency would try to break up Amazon. He said its focus right now is on determining responsibility. However, the lawsuit calls for “structural relief,” meaning the agency could — down the road — ask a court to change the way Amazon operates in small or big ways.

Overall, there haven’t been many monopolization cases that have ended in a court ordering a company to divest itself, said Sean Sullivan, a University of Iowa School of Law professor who teaches competition law.

“Judges try really hard to do the right thing,” he said. “But they are also aware that if they make a mistake, this type of remedy is potentially very expensive and would have huge financial consequences.”