As per the latest reports, the FTC and 17 US states have sued Amazon for monopolizing the e-commerce market, gaining an unethical advantage over its competitors. Just like Google, the e-commerce giant is now under the radar of the Federal Trade Commission, which accuses the organization of suffocating its competitors to increase profit margins.
Amazon is a Monopolist
As per the reports, chairperson FTC Lina Khan while talking to the reporters stated that Amazon is a monopolist and has been exploiting both its competitors and the customers. It does so by saturating the market with its unethical practices while charging more to the customers for its products.
A monopolistic approach with degrading service/ product quality would increase the chances for competitors to get more clientele. However, the e-commerce giant has narrowed the chances of this happening to a minimum.
However, such instances and roadblocks cannot stop the flurry of businesses setting up shops on the online marketplace. So, if you are an aspiring and existing Amazon seller, make sure you have a partner like Xfinity to keep you updated on all the latest developments while ensuring a smooth, seamless, and error-free Amazon experience.
The Accusations Made
While sellers are incentivized to use the shipping and delivery methods via FBA, Amazon easily uses its network to sell the products faster. As per FTC, third-party sellers account for 60% of the total merchandise, from which, the sellers only get to keep half of what they’re investing, which is unfair and quite simply, monopolistic. This significantly affects the Amazon FBA profit margins for these sellers.
In doing so, Amazon also leverages the ‘Artificially higher pricing’ phenomenon by blocking merchants from selling their goods on other e-commerce platforms while it itself boosts the same products under its name.
Since it owns whatever happens on the platform, Amazon uses ads and search dominance to show up products, packed and bagged at Amazon instead of the merchants, cutting their profit margins further short.
In other words, a single company dominates the retail market; however, in doing so, it also damages the consumers since it fails to deliver quality goods too.
The Background of the Accusations
It’s not just now that FTC has taken a good look at Amazon’s actions and decided to take action. The FTC has been observing the activities of the e-commerce giant for years, particularly when it rose to fame for its services.
As per the reports, Amazon accounts for more than 40% of the total online shopping in the US, amongst which people have subscription services to Amazon Prime as well. In addition, it has one of the largest online delivery systems with a huge number of air hubs, warehouses, trucking operations, packaging systems, and more.
Apart from this, Amazon has also dived into other domains, selling products from home security, filmmaking, healthcare, etc. on its platform. With so many operations, the company’s worth of $1.3 trillion makes it one of the most valuable organizations globally.
FTC Chair Lina Khan published a paper in 2017 ‘Amazon’s Antitrust Paradox’, which stated that despite offering low prices, it still was an anti-competitive organization. Later, she prepared a report that highlighted structural separations of market giants, including Amazon, Apple, Facebook, and Google.
Khan’s paper initiated the debate for reforming the US’s antitrust laws according to modern needs so that giants like Amazon, Google, Facebook, and others can be kept in check.
How Amazon Has Been Avoiding the FTC?
The FTC already sued Amazon in the Seattle federal court in June. However, the accusations were based on how the company, particularly 3 executives, compelled consumers to buy Prime subscriptions, deeming that the consumers were tricked and that the subscriptions were too complicated to be canceled.
In addition to this, two other severe allegations were made in lawsuits earlier this year, which were settled with Amazon paying $30 million. The first included Amazon’s failure to delete data related to children’s conversations with its voice assistant Alexa. The other was the non-consensual viewing of Ring’s camera recordings. Chair FTC Lina Khan holds all ethical grounds for participating in cases related to Amazon.
How Has Amazon Responded?
The lawsuit initiated has finally brought Amazon and Khan face to face in a long-awaited confrontation. However, Amazon’s general counsel David Zapolsky has denied the claims, stating that the FTC is taking unlawful actions and that it has departed from its motion of protecting consumers and competition.
He also stated that if any actions are taken based on the lawsuit, it’ll only increase troubles for everyone. Higher prices, fewer products, late deliveries, reduced business options, and more. Amazon with its one-day delivery has even enabled delivery on Sundays.
How Does The Lawsuit Proceed?
As of now, the agency needs to provide solid evidence to prove that Amazon has indeed engaged in unlawful practices and went against the antitrust regulations. Once done, the agency will pursue the court for clipping Amazon’s dominance by altering the company’s structure.
This could be done by changing the elements of some parts of the organization or the entire business. Once proven, the agency can also become specific to what parts should this action be implemented.
Also Read: The Amazon Odyssey: Navigating Clouds, Robots, and Low-Earth Orbit
