FTC preparing amended complaint, due October 31.
U.S. Judge John H. Chun in Seattle has cut a temporarily undisclosed portion of the Federal Trade Commission’s antitrust suit against Amazon.com Inc., but said an eventual trial would focus solely on Amazon’s liability under the FTC Act, the Sherman Act, and any state laws implicated (FTC v. Amazon, No. 2:23-cv-00932-JHC, W.D. Wash.).
As of this writing, the details of the Sept. 30 decision remain under seal as the parties prepare to brief Judge Chun on proposed redactions. In the meantime, the judge has given the FTC until Oct. 31 to file a second amended complaint “as to any claims dismissed without prejudice.”
Read our previous commentary on Amazon:
Responding to a bifurcation motion filed by Amazon, the judge held that trial – currently scheduled for October 2025 – would focus on liability. If the FTC succeeds, Judge Chun will schedule a conference with the parties to discuss how to address remedies.
In its amended complaint filed last year, the FTC cited various sections of the FTC Act, including those that give it authority to enforce the Sherman Act. The government also cited Amazon’s alleged violations of the Restore Online Shoppers’ Confidence Act, or ROSCA, which the FTC enforces. With the involvement of state attorneys general, numerous state laws are implicated.
In its December 2023 motion to dismiss, the subject of Judge Chun’s decision, Amazon argued that the complaint fails to state a claim of anticompetitive monopoly maintenance under Section 2 of the Sherman Act, attacking “well-established forms of competition” and alleging “no plausible anticompetitive effects.”
Referring to “Nessie,” Amazon’s one-time experimental automated price-matching program, Amazon says the FTC’s allegations collide with each other. The Sherman Act counts “attack Amazon for matching rivals’ lowest prices too often,” while its FTC Act Section 5 allegations attack Amazon for “not matching rivals’ lowest prices often enough,” Amazon argued.
Even if Amazon’s conduct is found to comply with the Sherman Act, the company said, the FTC maintains that the same conduct constitutes an “unfair method of competition” under the FTC Act. The government alleges that Amazon’s Nessie violated Section 5 of the FTC Act, although it didn’t allege the program violated the Sherman Act, according to Amazon.
These “substantive pleading failures” call for dismissal, Amazon wrote, adding that the FTC may not bring standalone Section 5 claims in district court and may not use Section 5 to condemn practices that are “lawful under ‘well-forged’ Sherman Act doctrine.” Amazon also gave various reasons why state law claims should be dismissed, especially those based on Sherman Act-equivalents.
Addressing the company’s conduct, the FTC says Amazon manipulated consumers through confusing, misleading, or absent language and a confusing interface to unintentionally upgrade to Amazon Prime. It also noted that the company insists on controlling what merchants charge on competing platforms.
Commentary by Rubin
MoginRubin’s Jonathan Rubin commented on the case last year, saying it presents an interesting test of competition law, homing in on the interplay of the FTC Act Section 5 and Sherman Act Section 2 in the context of the market definition. The FTC says there is a retail market segment of “online superstores,” which Amazon says is an “implausible” creation and that the government failed to allege a necessary “product market.”
“The conduct attempted to be reached by defining the superstore market, Amazon’s policies of prohibiting price discounting on non-Amazon sites … is likely to be harmful to competition even if the alleged market definition fails,” Rubin wrote.
“Enter Section 5 of the FTC Act,” he continued, “which offers a path for the court to condemn the conduct without necessarily finding that Amazon is engaged in maintaining a monopoly or has violated Section 2 of the Sherman Act. Of course, this will depend on whether the court believes that Section 5 establishes a violation for conduct that does not itself violate Section 2 or any of the other antitrust laws. Thus, the Amazon case may be a crucial test of the usefulness of Section 5 to reach anticompetitive conduct in circumstances in which monopolization cannot be proven by a preponderance of the evidence.”
Economics Day
In the latest activity in the case, attorneys for the government and Amazon filed a joint statement of issues relating to determining the antitrust market to be discussed during a proposed “economics day” hearing. They agree these questions would be appropriate:
- What economic concepts are relevant to the operation of Amazon’s store and how Amazon competes?
- How do economists define a relevant antitrust market?
- What economic principles apply to market definition, including but not limited to reasonable substitutability of products and services?
- What types of qualitative evidence can inform market definition?
- What types of quantitative evidence can inform market definition?
- How do economists define monopoly power for antitrust purposes?
- What types of evidence can help an economist assess whether a firm has monopoly power in a relevant market?
- How do economists analyze barriers to entry in connection with assessing whether a firm has monopoly power?
- What is anticompetitive conduct, as opposed to competition on the merits?
- How do economists evaluate whether challenged conduct harms competition in a relevant antitrust market?
- How do economists evaluate whether challenged conduct has generated procompetitive benefits for competition in a relevant antitrust market?