The New FTC Amazon Antitrust Case Is Better Than The Last One, But Still Weird

It's no secret that I think this FTC has been pretty disappointing and has missed a ton of opportunities to actually make things better for the public. For reasons I really don't understand, it has filed a lot of antitrust cases against tech companies that have almost always seemed half-baked, resulting in a losing streak in court. I have no doubt that some of the big tech companies are doing some terrible things, but it's been... weird at how little the FTC has actually been able to show in their main shots on goal.

Three years in, the FTC is at least getting a little better. As noted, I think the case that was filed against Google earlier this year finally had some strong arguments about how the company has abused its position in the online ads market. However, I still thought that the FTC's complaint against Amazon early this summer regarding its methods of convincing people to sign up for Prime was, again, pretty weak. I'm surprised by this, as it seems like if there's really problematic behavior, the FTC should have discovered it by now.

I don't know why the FTC keeps splitting up its cases against these companies and filing multiple suits, but it has now filed another antitrust case against Amazon, and this one is definitely stronger! It actually suggests some activity that, if the complaint is accurate, seems pretty problematic! But then it dumps in a bunch of things that don't seem problematic at all, and again I'm left perplexed. Why not just focus on the strong arguments that make your case look good?

The part that strikes me as strongest about the new lawsuit: the restrictions Amazon puts on sellers regarding how they can sell their products elsewhere, demanding that the lowest price must be on Amazon. As the complaint notes, Amazon used to do that contractually, but stopped once regulators started sniffing around:

Originally, Amazon imposed explicit contractual requirements barring all sellers from offering their goods for lower prices anywhere else. After European regulators began investigating, Amazon got rid of these requirements in Europe. After a U.S. senator called for antitrust scrutiny, Amazon did the same in the United States in 2019.

That's good that they stopped this practice as it definitely limits competition and can harm consumers who would prefer not to use Amazon. However, the complaint notes that Amazon still punished sellers who then chose to sell things cheaper elsewhere:

One set of tactics stifles the ability of rivals to attract shoppers by offering lower prices. Amazon deploys a sophisticated surveillance network of web crawlers that constantly monitor the internet, searching for discounts that might threaten Amazon's empire. When Amazon detects elsewhere online a product that is cheaper than a seller's offer for the same product on Amazon, Amazon punishes that seller. It does so to prevent rivals from gaining business by offering shoppers or sellers lower prices

The details here matter, and I want to see Amazon's explanation for this, but on a first pass, this looks bad, and certainly could be anti-competitive.

The complaint also notes that Amazon has gradually been increasing the fees it charges sellers, squeezing them. The details here will also matter, but I do know that back when we were looking for places to sell our CIA card game, it was cost prohibitive to offer it through Amazon directly, and friends who had sold directly through Amazon told us horror stories of hidden charges.

That, by itself, might not be anti-competitive, but when you combined it with Amazon pressuring sellers to offer their lowest price through Amazon, that combination can be a problem:

Moreover, Amazon's one-two punch of seller punishments and high seller fees often forces sellers to use their inflated Amazon prices as a price floor everywhere else. As a result, Amazon's conduct causes online shoppers to face artificially higher prices even when shopping somewhere other than Amazon. Amazon's punitive regime distorts basic market signals: one of the ways sellers respond to Amazon's fee hikes is by increasing their own prices off Amazon.

There are also some heavily redacted bits regarding an internal effort, named Project Nessie, that seems related to all of this, but the details are pretty much all blacked out, so it's difficult to tell how serious it is.

The next part, though, seems pretty weak. The complaint says that it's unfair for Amazon to say that to have your products be Prime Eligible" you have to use Amazon's own order fulfillment system. And, I get why that's annoying for sellers, but it's difficult to see how that's directly anti-competitive, when there are some fairly obvious legitimate business reasons for doing so. Most obviously: in order to make Prime make sense, including the ability to ship things so fast at no extra charge, having Amazon handle the fulfillment seems completely reasonable?

Amazon requires sellers who want their products to be Prime eligible to use Amazon's fulfillment service, Fulfillment by Amazon (FBA"), even though many sellers would rather use an alternative fulfillment method to store and package customer orders.

So, the whole section about this being anti-competitive just seems really weak, and takes away from the other parts that seem like a stronger argument.

There is a redacted quote in this section of the complaint, which implies that Amazon believes it could do things differently here, and experimented with it, but changed its mind because it was too beneficial to sellers. But, again, the quote is redacted, so it's not entirely clear.

Anyway, there's a lot in this complaint, and as with any antitrust case, we're talking many years before anything gets sorted. As noted, some of it makes some potentially stronger arguments, but some of it just seems weak, and it remains disappointing to see weak arguments trotted out, as it undermines the rest of the case.

Still, this does seem like a much better case than the one filed earlier this year.