The Federal Trade Commission and 17 states sued Amazon , alleging the e-commerce giant uses its market power to inflate prices and overcharge merchants. Amazon stock closed down Tuesday.
The lawsuit follows a multiyear investigation and represents the most significant legal threat in the history of the nearly 30-year-old company. Amazon, however, said its policies are good for consumers and vowed to fight the lawsuit.
"Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies," FTC Chair Lina Khan said in a news statement.
Khan added, "Today's lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition."
Amazon Stock: Allegations Of Unfair Strategies
The lawsuit argues that Amazon uses a series of unfair strategies to maintain monopoly power. That includes, for instance, alleged anti-discounting measures that punish sellers for offering prices lower than Amazon.
Further, the government alleges Amazon requires sellers to use its fulfillment services to qualify for the all-important "Prime" service.
In response, Amazon published a statement saying that the FTC is challenging practices that have lowered costs for consumers and created opportunity for businesses.
"If the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses — the opposite of what antitrust law is designed to do," David Zapolsky, Amazon's general counsel and head of public policy, said in a news release.
The FTC is asking for an injunction prohibiting Amazon from "engaging in its unlawful conduct and (to) pry loose Amazon's monopolistic control to restore competition."
However, it's less clear whether the regulator will try to break off parts of Amazon's expansive business empire. In a briefing with reporters, Khan reportedly avoided questions about whether that will happen.
"At this stage, the focus is more on liability," she said, according to The Associated Press.
Amazon Stock: Closes Down 4%
The lawsuit, however, is far from a surprise. Shares for Amazon were already trading down ahead of the lawsuit announcement, which came at noon ET.
Still, Amazon stock sank 4% to 125.98 on the stock market today. In addition, shares undercut the key 50-day moving average.
Amazon stock has gained about 50% on the year. But it's down more than 13.6% from a 52-week high of 145.86
News reports from Politico and others indicated the legal challenge would likely launch Tuesday.
Further, the action joins a series of challenges against Big Tech companies. For instance, the FTC already sued Facebook-owner Meta Platforms in 2021, alleging a monopoly in social media.
Also, the Justice Department is squaring off in the courtroom with Google parent Alphabet in an antitrust trial that challenges the company's market clout over online search.
