Last September, the Federal Trade Commission (FTC) filed a controversial antitrust lawsuit against Amazon alleging that the business had used its market power to harm consumers. The lawsuit accuses Amazon of:
- Illegally monopolizing online retail markets;
- Harming consumers through inflated prices;
- Charging excessive fees to third-party sellers; and
- Degrading service quality.
If the FTC’s case is successful, it will have a huge and devastating impact, not only on the world-leading American business itself, but on the businesses and consumers that rely on Amazon’s services.
Thankfully, a new analysis from the Phoenix Center identifies serious issues with the lawsuit and the claims it makes about Amazon’s business practice. Their new paper, titled “Amazon: A Monopolist That Undersells Its Competitors?” presents evidence that defeat core arguments underpinning the FTC’s antitrust case.
First, the paper refutes allegations that Amazon is “overcharging its customers” by showing that Amazon’s prices across thousands of products are on average 3.5% lower than major rivals like Walmart and Target based on pricing data. Drilling down further, Amazon had lower prices than Walmart 31% of the time and Target 47% of the time across the products Phoenix Center examined.
The FTC’s complaint also argued that Amazon allowing advertising from third-party sellers is evidence they are “degrading the services it provides.” But the Phoenix Center rightly points out this is standard industry practice, specifically with other major online marketplaces such as Walmart, Target, eBay and Etsy—all permitting third-party advertising.
Fundamentally, offering sellers top-tier space where they can advertise to potential buyers is a common practice with many similarities to practices used by other businesses. Grocery stores, for example, have long charged suppliers to put their specific products in spaces most seen by shoppers. Unlike grocery stores, Amazon discloses when the placement of a product is sponsored.
The Phoenix Center addressed another fundamental criticism made by the FTC—that Amazon’s commission rates and fulfillment fees are too high and an example of anti-competitive behavior. The study compared Amazon’s commission rates and fulfillment fees against Walmart’s for a sample of 200 products. Despite some relatively minor differences, the study found that overall fee structures were “highly comparable” between the two companies. Fundamentally, Amazon operates similar fee structures to businesses like Walmart because they compete with them, meaning sellers have a choice of where to sell their products. As the report shows, Amazon’s pricing and third-party seller practices appear to be commonplace for online marketplaces.
This report further shows that the FTC’s high-profile antitrust case against Amazon is driven more by an ideological, “big is bad” belief rather than substantiated evidence of consumer harm that courts require to prove antitrust violations under current legal precedents.
As the case proceeds, the Phoenix Center’s detailed, data-driven research stands as a useful analysis of the FTC’s claim that Amazon is a monopolist harming consumers. Their findings show Amazon’s conduct simply reflects a business in a fiercely competitive marketplace delivering value to its customers and third-party sellers through lower prices—an uncomfortable reality for progressives, but not an antitrust violation.