When the District of Columbia’s Attorney General filed an antitrust lawsuit against Amazon in May 2021, its third-party sellers and competitors breathed a sigh of relief.
But so far, Amazon continues to race forward unabated without interference from the government. Granted, the e-commerce giant made some changes to its operating model which at first glance are a response to anticompetitive allegations.
Now, more than a year after the case against it was launched, unscathed and emboldened, it is clear that Amazon is simply executing its long-term strategy to dominate the market.
The lawsuit alleged that Amazon’s “Sold by Amazon” program, violated antitrust laws by fixing prices with third-party sellers and precluding them from lowering prices on other platforms including their own.
It “shut down” the program in 2020, paid a $2.2 million fine, and proceeded to operate as it always has ever since albeit with new labels.
A Rose By Any Other Name Still Has Thorns
Amazon used this slap on the wrist to justify a hefty price increase for its Amazon Prime subscription in the U.S. by $20 for annual plans and $2 for monthly plans. Unclear how this helps consumers, it definitely helped Amazon add about $1.6 billion in annual revenue and increase its operating margins.
Meanwhile, the Federal Trade Commission (FTC) has been investigating Amazon’s practices since at least March 2021, when it slapped the company with a Civil Investigative Demand.
The investigation focuses on whether Amazon has violated the Restore Online Shoppers’ Confidence Act (ROSCA) by using deceptive or unfair tactics to enroll consumers into its Prime program without their consent and make it difficult for them to cancel.
Anticompetitive Tactics In Spotlight
The FTC alleges that Amazon used so-called “dark patterns” to cause consumers to enroll in Prime without their consent, in violation of the FTC Act and ROSCA.
Dark patterns are manipulative, coercive, or deceptive user-interface designs that trick consumers into making choices that are not in their best interest such as presenting them with opportunities to subscribe to Prime at $14.99 per month during the online checkout process while making the option to purchase items without subscribing to Prime an exercise is finding a needle in a haystack.
Deliberately creating friction in the transaction process to manipulate consumer choice is one thing. But acquiring consumer’s credit or debit card numbers, from the initial merchant through a process known as “data pass”, and charging them for Prime subscriptions without ever obtaining directly from them their billing information is less of a gray zone.
Amazon has also been accused of using a labyrinthine cancellation process internally referred to as “Iliad”, which was designed to stop users from ditching its service out of sheer frustration.
The FTC argues that these deceptive marketing practices have harmed millions of consumers and businesses and is asking the court to order Amazon to issue refunds and pay civil penalties.
Why A Breakup Is Unlikely
The antitrust lawsuit against Amazon is slated to hit the dockets in August 2023. The lawsuit will challenge Amazon’s business practices, including how it treats sellers, bundles its services, and leverages its power to reward or punish merchants.
In the most draconian version of this epic courtroom battle, the lawsuit could result in a forced breakup or restructuring of Amazon’s e-commerce operation.
That being said, remember that Microsoft faced antitrust charges in 1998 because the US Department of Justice (DOJ) accused the company of abusing its monopoly power in the software market, especially in the web browser segment.
The DOJ claimed that Microsoft used anti-competitive practices to prevent other browsers like Netscape Navigator, from gaining market share by bundling Internet Explorer with Windows, making it difficult for users to uninstall or switch browsers, and signing exclusive deals with computer manufacturers and internet service providers.
But even though the judge ruled that Microsoft should be broken up, Microsoft appealed the decision and argued that the judge was biased against them. The appeals court agreed and overturned the breakup order.
Instead, the DOJ decided to settle with Microsoft and reached an agreement that required Microsoft to change some of its business practices and allow more competition in the software market.
The Microsoft case underscores how difficult it is to break up a company as powerful as Amazon. Regardless of the outcome of the first case, the appeals court is likely to find that the breakup order was too harsh and not supported by sufficient evidence.
The political winds are another huge factor. If the new administration in 2024 is less interested in pursuing antitrust cases, it will pressure the DOJ to step aside.
As with Microsoft, the DOJ will arrive at the conclusion that breaking up Amazon would be a complex and lengthy process that could face more legal challenges and uncertainties for years to come.
The Exponential Pace Of Innovation Will Accelerate
Remember, complex antitrust litigation moves at a snail’s pace compared to the technology industry. By the time the Amazon case winds its way through the inner workings of the justice system, the competitive landscape will be unrecognizable.
With the emergence of Walmart, Shopify, Rakuten, and dozens of successful niche e-commerce marketplaces like Chewy, Etsy, and Wayfair, it will be increasingly more difficult to argue that Amazon has a monopoly at all.
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