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FTC Chair Lina Khan's lawsuit isn't about breaking up Amazon, for now

Federal Trade Commission Chair Lina Khan is leading a sweeping lawsuit against Amazon for allegedly abusing its market dominance to stifle competition.
Chip Somodevilla
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Federal Trade Commission Chair Lina Khan is leading a sweeping lawsuit against Amazon for allegedly abusing its market dominance to stifle competition.

Lina Khan rose to prominence in law school after she wrote a scholarly article in 2017 arguing for the breakup of Amazon – she compared the tech giant to the oil barons and railroad monopolies of more than a century ago. She's now the chair of the Federal Trade Commission, which is essentially the government's watchdog for corporations.

On Tuesday, the FTC brought a massive lawsuit against Amazon alleging it illegally abused its monopoly power to decimate competition.

Speaking to NPR's Ari Shapiro on Wednesday, Khan said, however, the suit doesn't exactly mirror her famous article and isn't explicitly asking for the breakup of Amazon. It's about bringing more competition, she said, so that rivals and consumers are operating in a fair marketplace.

"This complaint is focused on establishing liability," Khan said. "Ultimately, any relief needs to stop the illegal tactics, prevent a reoccurrence and fully restore competition."

The sweeping FTC lawsuit was joined by a coalition of 17 states attorneys general and focuses on Amazon's treatment of third-party sellers in its marketplace and how that affects prices for shoppers. The complaint alleges Amazon forces sellers into costly fees, pressures them to use the company's delivery network and punishes sellers for offering lower prices on other sites.

"You can basically disappear from Amazon's storefront if you put a lower price somewhere else," Khan told NPR. "Given the significant shopper traffic on Amazon, if Amazon makes you disappear from the storefront, that can be quite fatal for your business."

In a blog post, Amazon General Counsel David Zapolsky called the lawsuit "wrong on the facts and the law." He added that "the practices the FTC is challenging have helped to spur competition and innovation across the retail industry."

According to Amazon's numbers, around 60% of items purchased on Amazon are sold by third-party sellers. Many sellers say Amazon is so dominant in online retail that it's hard to sell anywhere else — so they stay there despite high fees.

Khan told NPR the fees amount to $1 of every $2 sellers make on Amazon — essentially half of their revenue goes to the company. She said the FTC's lawsuit is about changing that.

"This is really about ensuring the next set of Amazons are able to come into the market and fairly compete, rather than be unfairly and unlawfully locked out of the market," Khan said. "That's really what this lawsuit is designed to do."

For now, the FTC and states are asking the court for a permanent injunction, although that could change with time and breaking up Amazon is still a possible outcome. The case was filed in federal court in Seattle, where Amazon is based, and is expected to play out over the next several years.

Copyright 2023 NPR. To see more, visit https://www.npr.org.

Dara Kerr
Dara Kerr is a tech reporter for NPR. She examines the choices tech companies make and the influence they wield over our lives and society.