FTC And States Take On Amazon In Antitrust Battle: What's Going On? (UPDATE)

Editor's note: This story has been updated to reflect the nature of the lawsuit against Amazon and its intent. 

Amazon.com, Inc AMZN stock is trading lower Tuesday as the Federal Trade Commission and 17 states filed suit against the company, accusing it of exploiting monopolistic power against rivals. 

Amazon's tactics prevent rivals from growing and emerging by stifling competition on price, product selection and quality, according to the complaint filed in Seattle federal court. 

The complaint alleges that Amazon's schemes affect billions of dollars in retail sales, impacting businesses and consumers.

FTC Chair Lina M. Khan states that Amazon exploits its monopoly power, enriching itself at the expense of American families and businesses. 

The lawsuit aims to hold Amazon accountable and restore fair competition, according to the FTC. 

John Newman, deputy director of the FTC's Bureau of Competition, said Amazon's monopolistic behavior results in higher consumer prices and high fees for online sellers. 

The complaint focuses on what the FTC said is Amazon's anticompetitive conduct in the online superstore and marketplace services markets.

The suit claims that Amazon employs tactics like anti-discounting measures and conditioning sellers' "Prime" eligibility on costly fulfillment services, limiting competitors' ability to compete effectively.

Amazon's exclusionary practices, including replacing organic search results with paid ads and biasing search results toward its products, make it impossible for competitors to gain traction, according to the lawsuit. 

The company charges substantial fees, forcing sellers to pay close to 50% of their revenues to Amazon, leading to increased consumer prices, the lawsuit said. 

The FTC and state partners seek a permanent injunction to stop what they say is Amazon's unlawful conduct and restore competition in the market.

Between being paid for its logistics program, advertising, and other services, "Amazon now takes one of every $2 that a seller makes," Khan said, according to the Wall Street Journal. 

David Zapolsky, Amazon's Senior Vice President of Global Public Policy and General Counsel, said the FTC is straying from its consumer and competition protection mission. 

He argued that the practices challenged by the FTC have encouraged competition and innovation in the retail industry. 

Zapolsky warned that if the FTC prevailed, it could result in fewer product choices, higher prices, slower deliveries and limited options for small businesses.

According to recent media reports, the case will focus on several aspects of the Amazon marketplace and may suggest structural remedies that could result in a company breakup. 

However, Wedbush found the possibility of a split as unlikely. The FTC faces a challenging road ahead, given the benefits Amazon brings to consumer welfare through competitive pricing, selection, and industry-leading delivery services, according to the analyst firm. 

Price Action: AMZN shares traded lower by 2.99% at $127.35 on the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.