The Federal Trade Commission and 17 state attorneys general today sued Amazon.com Inc. for allegedly using anticompetitive business tactics in the e-commerce market.

The plaintiffs are seeking an injunction to halt the practices in question. Additionally, they’ve asked the federal court where the complaint was filed for “structural remedies.” This term often refers to antitrust measures such as corporate breakups that change a company’s organizational structure.

The lawsuit charges that Amazon employs anticompetitive business practices to maintain its leadership position in the e-commerce market. According to the FTC, those practices have harmed rival e-commerce companies and logistics providers. This harm, the agency added, has led to increased prices for consumers. 

Amazon pushed back against the lawsuit’s claims. “The practices the FTC is challenging have helped to spur competition and innovation across the retail industry, and have produced greater selection, lower prices, and faster delivery speeds for Amazon customers and greater opportunity for the many businesses that sell in Amazon’s store,” the company said. “The lawsuit filed by the FTC today is wrong on the facts and the law.”

The FTC charges that Amazon engaged in anticompetitive practices across two areas: the online superstore and marketplace services segments. The latter category includes offerings such as parcel delivery services that merchants rely on to support their operations. In its lawsuit, the FTC highlights two unfair tactics that Amazon has allegedly used to maintain a competitive edge across those markets.

Many online merchants sell their products on both Amazon’s platform and competing e-commerce websites. According to the FTC, the company has worked to deter merchants from selling their products at a lower price on rival marketplaces. “If Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible,” the FTC stated today. 

Amazon’s product pricing strategy reportedly relies on an algorithmic tool known as Project Nessie. The lawsuit contains at least two pages dedicated to the software, but most of the text describing it has been redacted. In the parts that are publicly accessible, the FTC describes Project Nassie as a “pricing system” and argues “there is no valid and cognizable justification for Amazon’s use of” of the software.

The lawsuit also accuses the company of engaging in a second anticompetitive practice. According to the FTC, Amazon has been “coercing” online merchants into shipping their goods to consumers using its own logistics service. That service is known as Fulfillment by Amazon, or FBA for short.

FBA gives online merchants access to the company’s fleet of delivery vehicles and a set of related logistics offerings. Amazon stores merchants’ products at its warehouses until they’re ordered by a customer and then manages the packaging process along with related tasks. Additionally, the company can process product returns and exchanges.

Online merchants often seek to give the items they sell on Amazon so-called Prime-eligible status. This status allows consumers who have a Prime subscription to access free shipping and other benefits when placing an order. According to the FTC, Amazon is “tying Prime eligibility to FBA use” in a practice that “restricts sellers’ choices about which fulfillment provider they use.”

“Without Amazon’s coercion, sellers could more easily offer their products to shoppers via multiple outlets, including other online superstores and marketplaces,” the lawsuit states. “Second, Amazon forecloses a significant volume of orders from independent fulfillment providers by making FBA effectively the only fulfillment option available for Prime-eligible orders.”

Amazon has pushed back against the lawsuit’s claims. David Zapolsky, the company’s general counsel and senior vice president for global public policy, today published a lengthy blog post addressing the arguments raised by the FTC.

“We fundamentally disagree with the FTC’s allegations — which are in many cases wrong or misleading — and with their overreaching and misguided approach to antitrust, which would harm consumers, hurt independent businesses, and upend long-standing and well-considered doctrines,” Zapolsky wrote. “We will contest this lawsuit, and we will also continue inventing to put our customers — both consumers and the businesses that sell in our store — first.”

Photo: Amazon