SEATTLE (Legal Newsline) - The new-look Federal Trade Commission will be in Seattle federal court March 7 for a special event in one of the Biden Administration's biggest lawsuits - an antitrust case against Amazon.
Judge John Chun is holding an "Economics Day" hearing, giving both the FTC and Amazon chances to explain why or why not the online retailer is violating anticompetition laws.
Amazon has argued the FTC's case, brought by former chair Lina Khan, is attacking "the very essence of competition." On Dec. 2, Chun ordered a hearing that will include 90 minutes for each side.
The idea had been floated earlier in the year by Chun, who wants to "hear from both sides' economists about the theories being advanced in this case" in order to be "as educated as possible regarding the economic theories i this case."
The FTC claims Amazon has cowed the entire retail sector into charging higher prices by threatening the 560,000 merchants who sell goods on its site with punishment if they offer lower prices anywhere else.
The government alleges a variety of illegal tactics including forcing third-party sellers to use its fulfillment and advertising services to increasing their ranking in search results.
Those vendors then pass through Amazon’s higher costs to consumers, the government says. Amazon attacked those claims as fanciful.
Three FTC lawyers have withdrawn from the case since the election of President Trump, who installed Republican Andrew Ferguson as chair. One seat on the five-member commission remains open, and Trump has nominated Mark Meador.
Eleven topics are on the table at Economics Day, such as whether Amazon has unlawfully maintained a monopoly and in what market. The FTC has defined the relevant market as online superstores.
"As an example, Plaintiffs allege that retailers who focus on particular categories of products, such as Chewy and Home Depot, are outside the relevant market because they do not offer the same one-stop-shopping experience for more than one category of consumer products," Amazon's lawyers wrote Feb. 28.
"As one respected antitrust scholar has explained, this market strains common sense..."
Amazon cites Herbert Hovenkamp, a professor at Pennsylvania University known for his studies of antitrust law.
Hovenkamp wrote customers looking to furnish a kitchen could buy a toaster on Amazon, a blender from Target.com and a microwave from a brick-and-mortar department store, which means the relevant market is larger than "online superstore."
"Plaintiffs allege that Amazon's decisions about advertising and so-called self-preferencing have degraded the quality of the search results that customers receive when shopping in Amazon's store," the company says.
"Economists will seek to test this theory, including by asking whether increases in advertisements and/or self-preferencing, to the extent they exist, consistently degrade the shopping experience (otherwise, such decisions could not be evidence of monopoly power) and whether other retailers who are not alleged to be monopolists have engaged in similar conduct (in which case, the conduct is presumptively efficient and procompetitive)."
While the Sherman Act does prohibit predatory pricing, or pricing below cost in hopes of driving competitors out of a market, the FTC claims Amazon is holding prices higher than they otherwise would be by forcing third-party sellers to pass through its inflated fulfillment and advertising costs.
The FTC also claims Amazon has grabbed so much of the shipping and fulfillment business that competitors can’t reach sufficient scale to be efficient or are scared away from the market entirely.
Khan admitted she buys diapers on Amazon and in her career-making 2017 academic article attacking Amazon’s practices, she acknowledged it would be necessary to “revise antitrust law” to go after Amazon.