SEATTLE (Legal Newsline) - The federal judge handling the Federal Trade Commission's antitrust lawsuit against Amazon won't let certain claims from Pennsylvania and New Jersey to continue.
The states are among a group that joined the FTC in alleging the online retailer is violating anticompetition laws. Seattle federal judge John Chun on March 20 said they can't proceed with claims under their respective consumer protection laws.
Those allegations pointed to "Project Nessie," an algorithm the FTC said could raise prices on Amazon and elsewhere by predicting whether other sellers would follow an Amazon price increase.
That is "unconscionable" under New Jersey's consumer protection law, the state claimed.
"But even if charging exorbitant prices alone were unconscionable, Amazon uses Project Nessie to charge prices that other online stores would match," Chun wrote.
"New Jersey conflates its claims in asserting that Amazon 'misleads' consumers by not disclosing its use of Project Nessie. Whether Amazon has a duty to disclose its use of Project Nessie relates to New Jersey's claim of knowing concealment, not unconscionability."
Amazon has argued the FTC's case, brought by former chair Lina Khan, is attacking "the very essence of competition."
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Three FTC lawyers have withdrawn from the case since the election of President Trump, who installed Republican Andrew Ferguson as chair. There are only two FTC commissioners now after Trump recently dismissed two Democrats.
Chun's order said Pennsylvania failed to point to a direct statement from Amazon about low and competitive prices, in the state's attempt to summon its consumer protection law. Pennsylvania instead takes issue with Amazon's justification for not offering a price-matching policy.
"These justifications cannot be construed as claims that Amazon sets prices free from anticompetitive influence," Chun wrote.
"Because they are 'vague promises of cost savings and competitive rates' rather than 'measurable factual assertions' about its products, Amazon's justifications are non-actionable puffery."
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.