The FTC Is Suing Amazon Alleging Anti-Competitive Behavior and Overcharging
Key Takeaways
- The Federal Trade Commission (FTC) has filed suit against Amazon, claiming anti competitive behavior and overcharging
- Investigations for the suit have taken years, and it’s expected to be one of the biggest legal challenges Amazon has ever faced
- Even so, it’s far from Amazon’s first tussle with the FTC, and investors don’t need to panic just yet
Yet another anti-trust lawsuit has been leveled against big tech by the Federal Trade Commission (FTC). This time it’s Amazon in the firing line, with the FTC filing suit after an investigation that has taken multiple years.
It’s setting up Amazon to be thrust into one of their biggest legal challenges in the past three decades.
The FTC’s suit claims that Amazon is engaging in anti-competitive behavior by penalizing those who offer discounts to purchase elsewhere, such as on their own company website. In some cases sellers are even specifically prohibited from doing this to continue selling on Amazon.
Not only that, but the fulfilled by Amazon (FBA) model means that sellers are stuck paying high fees for Amazon managed delivery, even if alternative options are available to them. But this only scratches the surface, with the document outlining the FTCs case totalling 124 pages.
So what does this mean for the future of Amazon?
FTC takes aim at tech
Well it’s not purely an Amazon problem. The FTC’s role is to ensure that consumers have access to a fair and even market. Now obviously big companies like Amazon have advantages over your local mom and pop, but the FTCs aim is to ensure there is at least some competition.
Right now the FTC are simply looking to force Amazon to reign in their anti competitive behavior. This could include options such bringing down fulfillment fees or removing restrictions on how third party sellers price their products.
Sometimes though, this culminates in regulators aiming to break up monopolies. If this was the case, it could potentially force Amazon to split the company into separate entities. One example would be to have the cloud computing division, Amazon Web Services, spun off to become a company in its own right.
To be clear, that’s highly unlikely right now, and even if it were to happen it would only be at the end of a lengthy (like, probably decades) legal battle.
In the short term, investors are likely to be more concerned about potential fines or settlements, as well as limits to further growth that could be imposed by this scrutiny.
Antitrust focus on acquisitions grows
The reason for that is because once a company gets to the size of Amazon and Microsoft, organic growth naturally slows. When just about every household in the US that can afford a Prime account already has one, there’s a limit to how much you can grow in your core business.
It’s why Amazon has been constantly looking for ways to expand, to offer their customers a wider range of products and services. Recently their acquisition of the Roomba vacuum cleaner came under close scrutiny from the FTC, over similar monopoly concerns.
The bottom line
For companies as big as Amazon, antitrust lawsuits really are just par for the course. While this case may be different, it’s likely that Amazon will be prepared to work with the FTC on a compromise, long before it ever sees the inside of a courtroom.
Investors shouldn’t expect to see this have any major impact on Amazon’s stock price in the short term, but of course it’s an issue to keep an eye on going forward. If Amazon and the FTC both dig their heels in, the issue could grow to become one that really is worth worrying about.
We’ll just have to see which of these outcomes it’s going to be.
