Amazon (AMZN) -) shares tumbled in midday trading Tuesday after the U.S. Federal Trade Commission accused the group of operating a monopoly in its giant online retailing business.
The FTC, in a lawsuit filed filed in Western Washington district court alongside complaints from 17 state attorneys general, follows a four-year investigation. It accuses Amazon of harming consumers with its monopoly position in online retailing through higher prices and unfairly limiting competition by favoring its own products over rival merchants.
The suit alleges that Amazon will "bury" lower-priced products deep into its search rankings, effectively making them "invisible," while effectively conditioning sellers to obtain "Prime" eligibility for their products, which are then automatically linked to the company's fulfilment services.
“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said FTC Chair Lina Khan.
“The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them."
"Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition," she added.
Amazon shares were marked 2.8% lower in mid-day trading following release of the FTC complaint and changing hands at $127.62 each.
“Today’s suit makes clear the FTC’s focus has radically departed from its mission of protecting consumers and competition," Amazon said in response to the filing.
"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," the statement added.
"If the FTC gets its way, the result would be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses—the opposite of what antitrust law is designed to do."
Amazon said operating profit more than doubled over the three months ended in June to $7.68 billion, smashing the Wall Street forecast of $4.72 billion, as revenue rose 10.9% from a year earlier to $134.4 billion
Online sales were 4.2% higher than a year earlier at $53 billion, largely matching Wall Street forecasts and suggesting moderately improving consumer spending over the first three months of the year.
- Get exclusive access to portfolio managers and their proven investing strategies with Real Money Pro. Get started now.
