The Federal Trade Commission is finalizing its long-awaited antitrust lawsuit against Amazon, four people with knowledge of the matter told POLITICO, a move that could ultimately break up parts of the company.
The FTC has been investigating the company on a number of fronts, and the coming case would be one of the most aggressive and high-profile moves in the Biden administration’s rocky effort to tame the power of tech giants. The wide-ranging lawsuit is expected as soon as August, and will likely challenge a host of Amazon’s business practices, said the people, who were granted anonymity to discuss a confidential matter. If successful, it could lead to a court-ordered restructuring of the $1.3 trillion empire and define the legacy of FTC Chair Lina Khan.
Khan rose to prominence as a Big Tech skeptic with a 2017 academic paper specifically identifying Amazon as a modern monopolist needing to be reined in. Because any case will likely take years to wind through the courts, the final result will rest with her successors.
The exact details of the final lawsuit are not known, and changes to the final complaint are expected until the eleventh hour. But personnel throughout the agency, including Khan herself, have homed in on several of Amazon’s business practices, said some of the people.
The complaint is likely to focus on challenges to Amazon Prime, Amazon rules that the FTC says block lower prices on competing websites, and policies the FTC believes force merchants to use Amazon’s logistics and advertising services, according to some of the people.
The agency has been drafting a complaint since at least the end of last year, some of the people said, and is likely to file its case in federal court rather than its in-house tribunal.
In its probe, the FTC has interviewed dozens of witnesses both inside and outside Amazon, including CEO Andy Jassy and former CEO and founder Jeff Bezos, some of the people said. The FTC has collected millions of documents from Amazon and third parties over the last three years to build its case.
Spokespeople for Amazon and the FTC declined to comment.
Among the potential claims are allegations similar to existing cases from the attorneys general in Washington, D.C., and California, some of the people said. Those cases center on Amazon’s rules requiring third-party retailers to offer their lowest prices on its platform, thereby cutting off the possibility of lower prices elsewhere.
Amazon has previously disputed those allegations saying sellers set the prices for their goods. A Washington, D.C., judge threw out the case, but a California judge is letting it move forward.
Amazon Prime, which began as a subscription for unlimited free shipping, is also expected to be a target, some of the people said. Prime has evolved to include books, music and video streaming. The FTC is concerned that the bundle of services is used to illegally cement the company’s market power.
The FTC is also expected to claim that Amazon steers sellers to its own logistics services, which include shipping and warehousing, by rewarding them with better placement on the site, and punishing them when they don’t, some of the people said. Amazon briefly allowed sellers to use other logistics providers and still receive prioritized listings, but discontinued that several years ago., though it recently announced it is restarting that program. Bloomberg earlier reported the likely inclusion of claims involving the logistics business.
Amazon’s rapidly growing digital advertising business will also likely be targeted, some of the people said. The agency is 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, some of the people said.
The Amazon investigation began in the Trump administration under former Chair Joe Simons. However, he prioritized a different investigation into Meta’s Facebook. Shortly after Khan joined the agency, she bulked up and reorganized the team leading the Amazon probe, a move first reported by The Information.
Top enforcement officials in the Biden administration have aggressively gone after corporate mergers in the past year, but more often than not have struck out. The FTC lost its bid to block Microsoft’s $69 billion purchase of Activision last week, which came months after another loss in its case to block Meta’s acquisition of a popular virtual reality app. The spate of high-profile losses has amped up pressure on the FTC to bring a successful case against Amazon.
The Justice Department meanwhile has two separate lawsuits against Google over its search and advertising businesses, the former of which is scheduled for a two-month trial in September. It is preparing an antitrust case against Apple, and has pending investigations into Ticketmaster and Visa, among others.
Amazon has sought Khan’s recusal both for her past statements against the company and over investigative work into the tech sector while a staffer on the House Judiciary Committee. The agency has not ruled on the request, but filing a case in federal court will help sidestep the issue. In its in-house tribunal, FTC commissioners serve as prosecutors and judges, a role that makes Khan more susceptible to claims of bias.
The FTC could also bring state attorneys general on board for the lawsuit, another reason to file in federal court. In addition to California and Washington, D.C., New York is also investigating the company.
And while there is no large, formal multistate alliance investigating Amazon, as there is with Facebook and Google, other states could join the FTC’s case. The FTC has told some states that it plans to share more information by the end of July that can be used to determine whether to join its lawsuit, some of the people said.
The exact allegations will determine who joins. Some states — and some within the agency — have pushed back against making Prime, a popular consumer service, a focal point of the case, some of the people said.
This will not be the first case the FTC has filed against Amazon under Khan. The company recently agreed to pay $30 million to settle a pair of privacy lawsuits involving its Ring doorbell cameras and Alexa smart speakers made for kids. Amazon is also fighting allegations that it has made Prime unnecessarily difficult to cancel. And the FTC is currently investigating the company’s purchase of robot vacuum maker iRobot, which POLITICO previously reported that agency staff are leaning toward trying to block.
Amazon has also settled similar allegations in Europe by making changes to its sales practices and restricting its use of data from third-party sellers on its European web stores.
One of the FTC’s final steps before filing a lawsuit will be to give Amazon’s executives and attorneys a final chance to plead their case before the commissioners. That so-called last rites meeting, largely a formality, is not expected to take place until at least August, two of the people said, and is expected to be the last step before a case is filed.
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