FTC Sues Amazon for Illegal Monopoly Maintenance Through Anti-Discounting and Seller Coercion

The Federal Trade Commission, joined by 17 state attorneys general, filed a landmark antitrust lawsuit against Amazon alleging the company illegally maintains monopoly power in online retail through systematic anti-competitive practices. The complaint documents Amazon’s “anti-discounting” algorithm that punishes third-party sellers for offering lower prices elsewhere, coerces sellers into using expensive fulfillment services, and extracts nearly 50% of seller revenues through monopolistic fees—fundamentally transforming from a retailer into a monopolistic toll-booth that taxes the entire e-commerce ecosystem.

The FTC’s Monopolization Allegations

On September 26, 2023, the FTC filed a comprehensive antitrust complaint against Amazon.com, Inc. in the U.S. District Court for the Western District of Washington, alleging the company violates Section 5 of the FTC Act and Section 2 of the Sherman Antitrust Act through systematic monopoly maintenance. The lawsuit was joined by attorneys general from California, Colorado, Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin—representing one of the broadest state coalitions in modern antitrust enforcement.

The complaint alleges Amazon uses “a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power” in two related markets: online retail services and online marketplace services for third-party sellers. Unlike traditional antitrust cases focused on single practices, the FTC documented how Amazon’s various anti-competitive tactics work together systematically to prevent competition and extract monopoly rents from both consumers and sellers.

Anti-Discounting: Algorithmic Price Control Across the Internet

The centerpiece of the FTC’s case involves Amazon’s sophisticated anti-discounting mechanisms that effectively control prices across the entire internet, not just on Amazon’s platform. The complaint alleges Amazon deploys algorithms that continuously monitor prices across competitor websites and punish sellers who offer lower prices elsewhere—even on their own websites.

The Buy Box Punishment System

Amazon’s most powerful enforcement mechanism is exclusion from the “Buy Box”—the prominent placement where 98% of Amazon sales occur. The FTC documented that if Amazon’s price-monitoring algorithms detect a product available for less on another platform (including the seller’s own website), Amazon excludes that seller from Buy Box eligibility. This creates a devastating choice for sellers: maintain Amazon’s prices everywhere or lose virtually all Amazon sales.

The anti-discounting enforcement works through:

1. Continuous price surveillance: Automated systems crawl competitor websites monitoring third-party seller prices
2. Algorithmic punishment: Sellers offering lower prices off-Amazon are automatically demoted or excluded from Buy Box
3. Opaque enforcement: Sellers receive no clear notification of why they lost Buy Box access, making it difficult to challenge
4. De facto price-fixing: Sellers must match Amazon’s prices across all channels to maintain Amazon access

Market-Wide Price Inflation

The FTC argues this anti-discounting regime inflates prices across the entire internet, not just on Amazon. Because sellers cannot afford to lose Amazon access—representing 37.8% of all U.S. e-commerce—they must raise prices on competing platforms to match Amazon’s inflated prices. This transforms Amazon’s platform monopoly into control over internet-wide pricing, harming consumers even when they shop on competing sites.

The complaint quotes Amazon’s own internal documents acknowledging this anti-competitive impact. Amazon executives understood the anti-discounting mechanism suppressed price competition but implemented it anyway to protect Amazon’s monopoly position.

Fulfillment Service Coercion and Prime Gatekeeping

The second major allegation involves Amazon’s coercive bundling of fulfillment services with Prime eligibility. The FTC documented that Amazon conditions sellers’ ability to obtain Prime badge placement on using Amazon’s expensive Fulfillment by Amazon (FBA) service, even when third-party logistics providers could offer equivalent or superior service at lower cost.

The Prime Exclusivity Requirement

Prime eligibility is essential for third-party sellers because Prime members spend significantly more than non-Prime shoppers and expect two-day delivery. However, Amazon requires sellers to use FBA to obtain Prime eligibility, with limited exceptions that are difficult to access and maintain. This creates a forced bundling where:

• Sellers cannot obtain Prime badge without using Amazon’s fulfillment
• Amazon charges 30-50% fees on FBA transactions
• Sellers are locked into Amazon’s logistics even if competitors offer better service
• Third-party logistics providers are foreclosed from competing for Amazon seller fulfillment

Cross-Platform Foreclosure

The FBA requirement creates barriers to multi-platform selling. When sellers use FBA, their inventory is locked in Amazon’s warehouses, making it expensive and complex to fulfill orders from other platforms. The FTC alleges this is intentional design to prevent sellers from efficiently operating on competing marketplaces like Walmart, eBay, or Shopify.

Amazon’s executives acknowledged internally that FBA requirements disadvantaged sellers who wanted to maintain multi-platform presence, but implemented the policy anyway to entrench Amazon’s marketplace dominance.

The Monopoly Tax: 50% Revenue Extraction

The FTC complaint documents that Amazon’s combined fees now extract close to 50% of third-party seller revenues—a dramatic increase from approximately 19% when the FTC closed its prior Amazon investigation in 2017. These fees include:

• Referral fees: 8-15% commission on each sale
• FBA fees: 25-35% for fulfillment and storage
• Advertising fees: Increasingly mandatory to maintain visibility, adding 10-20%
• Monthly subscription: Fixed costs for professional seller accounts

The complaint characterizes these escalating fees as monopoly extraction enabled by Amazon’s market power. Sellers cannot afford to leave Amazon’s platform because it represents such a large share of online retail, so Amazon can continuously increase fees without fear of seller exit. The FTC argues this represents classic monopoly abuse: using market power to extract supra-competitive rents rather than competing on service quality or price.

Advertising as Monopoly Rent

Particularly egregious is Amazon’s transformation of search placement into a pay-to-play auction. The FTC documented that organic search rankings have deteriorated so severely that sellers must purchase advertising to maintain visibility—even for their own branded products. This converts Amazon’s search function from a product discovery tool into an advertising revenue mechanism that extracts additional monopoly rents.

Internal Amazon documents show executives understood that degrading organic search to force advertising purchases would harm consumers (by filling search results with paid placements rather than relevant products) but prioritized short-term revenue extraction over consumer experience.

Market Definition and Monopoly Power

The FTC defined two relevant markets where Amazon holds monopoly power:

Online retail services market: Amazon controls approximately 37.8% of all U.S. e-commerce, with market share exceeding 50% in many product categories. No other platform approaches Amazon’s scale, creating a “must-have” marketplace for sellers.

Online marketplace services market: Among platforms where third-party sellers can reach consumers, Amazon’s dominance is even more pronounced, controlling the vast majority of third-party seller transactions.

The complaint documents barriers to entry including:

• Network effects: Sellers attract buyers; buyers attract sellers
• Data advantages: Amazon’s transaction data creates information asymmetry
• Infrastructure lock-in: FBA integration makes switching costly
• Brand recognition: “Amazon” is synonymous with online shopping for many consumers

These barriers mean potential competitors cannot effectively challenge Amazon even with superior service or pricing, demonstrating durable monopoly power.

Regulatory Capture and Enforcement Failure

The lawsuit represents a significant reversal from prior FTC inaction. In 2017, the FTC closed an investigation into Amazon without enforcement action, allowing the monopolization to accelerate. The 2023 complaint implicitly acknowledges this regulatory failure—Amazon’s monopoly strengthened dramatically during the period when the FTC declined to act.

Several factors contributed to delayed enforcement:

Revolving door: Amazon employed numerous former FTC officials who participated in prior Amazon investigations Political influence: Amazon’s lobbying expenditures exceeded $18 million annually during 2017-2023 Complexity: Amazon’s integrated business model obscured monopolistic practices Chicago School ideology: Antitrust enforcers prioritized consumer prices over competition, missing Amazon’s harm

The complaint quotes FTC Chair Lina Khan’s recognition that “the FTC’s failure to act sooner allowed Amazon to further entrench its monopoly power.” Khan had written influential scholarship on Amazon’s anti-competitive structure before joining the FTC, providing intellectual foundation for the enforcement action.

Amazon’s Defense and Litigation Strategy

Amazon immediately moved to dismiss the complaint, arguing:

1. Pro-consumer: Amazon’s practices benefit consumers through lower prices and convenient service
2. Competitive market: Walmart, Target, eBay, and others provide vigorous competition
3. Voluntary participation: Sellers choose to use Amazon and can leave anytime
4. Cherry-picked evidence: FTC mischaracterizes normal business practices

Amazon’s motion to dismiss was largely denied on October 7, 2024, with Judge John Chun allowing nearly all FTC claims to proceed. The judge dropped only select state-specific claims while permitting the core federal antitrust allegations to continue toward trial.

Significance for Platform Antitrust

The Amazon case represents several antitrust milestones:

Platform power recognition: Acknowledges that platform operators can abuse market power even while claiming to serve consumers

Algorithmic enforcement: Documents how automated systems enable anti-competitive practices at scale impossible with manual oversight

Cross-market effects: Shows how platform dominance in one market (retail) enables monopolization in adjacent markets (logistics, advertising)

Ecosystem lock-in: Illustrates how integrated platforms create multi-sided lock-in that forecloses competition

Monopoly pricing: Establishes that escalating fees can constitute monopoly abuse even absent traditional price-fixing

The case influenced parallel enforcement actions against Apple (App Store), Google (Play Store), and other platform monopolies that extract high fees while foreclosing competition.

Broader Implications

If successful, the FTC’s case could force fundamental changes to Amazon’s business model:

Potential remedies discussed include:

• Prohibition on anti-discounting enforcement
• Separation of fulfillment services from marketplace access
• Limits on fee extraction and fee transparency requirements
• Structural separation of Amazon’s retail and marketplace businesses

Market impacts could include:

• Lower prices as sellers can compete across platforms
• Increased competition in e-commerce and logistics
• Reduced barriers to entry for Amazon alternatives
• Restored multi-platform selling viability

The lawsuit demonstrates growing recognition that platform monopolies require aggressive structural remedies rather than behavioral constraints. Amazon’s market power—achieved partly through regulatory inaction during critical growth periods—may necessitate breakup or fundamental restructuring to restore competitive markets.

As of late 2024, the case proceeds toward trial with discovery producing Amazon’s internal documents on anti-competitive strategy. The outcome will determine whether U.S. antitrust law can effectively address platform monopolies or whether companies like Amazon have become too large and entrenched to face meaningful accountability.