(CTN News) – There is a possibility that the FTC may file a lawsuit against Amazon, one that is so broad and far-reaching that it could break up parts of the company, and it is in the final stages of filing.
An official filing is expected by the end of August, and it could force the tech giant to change several of its business practices as a result of the filing.
The main point of the lawsuit is that Amazon abuses its dominant position in the market by rewarding merchants who use its logistics (warehousing, shipping) and advertising services, punishing those who do not, and preventing lower prices on competitors’ websites from appearing.
Several months ago, investigators on the FTC’s Enforcement Division and the office of agency boss Lina Khan worked together to refine the case for several months, finalizing details such as where the case should be filed, according to Bloomberg, citing documents reviewed by the publication and three people familiar with the case.
A slew of witnesses from the organization has been interviewed by the Commission, according to Politico, including Andy Jassy, Amazon’s CEO, and Jeff Bezos, the company’s founder and former CEO.
To build its case, the government has gathered millions of documents from the company and third parties.
Amongst the suit’s allegations is that Amazon requires third-party retailers to offer goods on its platform at their lowest price, meaning that consumers cannot find the same items cheaper anywhere else than Amazon.
This was previously denied by the company, claiming that the prices are determined by the sellers themselves.
Further, the Federal Trade Commission (FTC) believes that Amazon’s Prime membership subscription, which includes next and same-day deliveries, video streaming, music, books, and games, is also a target because it is believed to illegally strengthen market position by providing these services.
Amazon’s sales are primarily made by third-party merchants, who, this year, are paying an average commission of over 50% on every sale, up from 35.2% in 2016.
This is due to Amazon raising Fulfillment by Amazon fees and increasing storage costs.
It is optional for merchants to pay for Amazon’s logistics and advertising services, however most merchants view these services, especially advertising, as essential to doing business.
Moreover, the FTC has reportedly accumulated evidence that disadvantages merchants who do not use its services by giving them lower placements.
In the event that Khan’s suit is successful, the company may be forced to undergo a restructuring by a court order. Federal court is likely to hear the FTC’s case rather than its own in-house tribunal.
Amazon has been in the sights of the FTC this year. The company recently settled with the Commission for $5.8 million regarding privacy violations involving employees spying on customers.
The Federal Trade Commission filed a lawsuit against in June over its “deceptive” Prime subscription tactics.