The walls may be closing in on Amazon.
Reports suggest the Federal Trade Commission (FTC) is finalizing an antitrust case against the e-commerce and logistics giant.
The trade watchdog expects to file a suit against the tech titan in federal court as early as August, Politico reported Tuesday. The long-awaited case is expected to target Amazon Prime‘s far-reaching benefits, the company’s pricing power, as well as policies the agency believes force merchants to use Amazon’s logistics and advertising services, the report said.
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Amazon and the FTC both declined to comment.
The federal agency is reportedly concerned that the Amazon Prime subscription service, which includes books, music and streaming video, is used to pad the Seattle firm’s market power.
The FTC already filed a separate complaint in June accusing the company of using deceptive tactics to trick users into signing up for Prime subscriptions without their consent, while intentionally making it difficult for consumers to cancel their membership.
Amazon’s pricing power would also be under scrutiny, namely the rules requiring third-party retailers to offer their lowest prices on Amazon and not with competitors. The allegations are similar to existing cases brought by attorneys general in Washington, D.C. and California.
A Washington judge dismissed the first case, but a California judge rejected Amazon’s bid for dismissal.
The FTC is also expected to claim that Amazon steers sellers to its own fulfillment and logistics services, which include shipping and warehousing, by rewarding them with better site placement via the coveted “buy box.”
The agency is also concerned Amazon forces merchants to buy ads in order to get better placement in customer search results. The FTC sees advertising as a tax Amazon can collect after forcing sellers to use its platform through price parity provisions requiring the lowest prices on its site.
Absent from the Politico report, surprisingly, was any reference to Amazon’s often alleged use of third-party seller data to inform its own private-label product strategy, which has long been subject to criticism from U.S. lawmakers. Two years ago, the House of Representatives unveiled a bill targeting the strategy with the goal to potentially force Amazon to decouple its bustling private-label business from the rest of the company.
Amazon’s loss could be big for Shein, Temu
The potential Amazon lawsuit comes as ultra-fast-fashion giant Shein is looking to expand into a bigger e-commerce marketplace that—similar to Amazon—sells home appliances, electronics, kitchenware and DIY products. The Chinese e-commerce giant has already launched the marketplace in the U.S., Mexico and Brazil, and is recruiting global brands and third-party sellers on its platform.
Shein’s launch comes on the heels of the exploding popularity of chief rival marketplace Temu, with the two e-commerce titans trading blows in a heated legal showdown.
Both marketplaces, each subject to legal and ethical concerns of criticism, could stand to take market share from Amazon if the antitrust suit spooks merchants into pursuing new sales channels.
In fact, Shein is already recruiting third-party sellers from Amazon, according to a Wall Street Journal report, offering incentives like zero commission for the first three months, or zero advertising charge. To join Shein’s platform, sellers must already have annual sales of $2 million on Amazon, WSJ said, citing some of its recruitment advertisements.
Amazon makes concessions in the U.K.
Amazon’s potential federal lawsuit comes as the tech titan proposed four concessions to the U.K.’s competition watchdog in response to an investigation into the company’s business practices, particularly that it favors its own retail business over competing sellers on its marketplace, and—like the potential FTC suit—favors sellers using Amazon’s warehousing and delivery services rather than rival logistics businesses.
Amazon offered four ways to get back into the watchdog’s good graces. It said it would not use rival sellers’ marketplace data to gain an unfair advantage over other sellers and would treat all sellers’ offers equally when selecting which to feature in the buy box. Amazon also said it would allow third-party sellers to negotiate their own rates directly with independent providers of Prime delivery services and would appoint an independent trustee to monitor its compliance with these commitments.
The Competition and Markets Authority (CMA) said Amazon addresses its competition concerns, and will consult a third party through Sept. 1 before making a final decision.
“While we disagree with the CMA’s preliminary concerns, we have engaged constructively with them to address the matters they have raised and to preserve our ability to serve U.K. customers and the more than 100,000 U.K.-based small and medium-sized businesses selling through our U.K. store,” an Amazon spokesperson told Sourcing Journal.
Concessions in the U.K. follow similar commitments it made to the European Commission in December 2022, ending a two-year antitrust investigation in the European Union.
Amazon’s agreements were largely comparable to its U.K. compromises, with the main difference being that the company would have to add a second buy box to maximize third-party seller visibility.
