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Amazon deprives competitors of critical mass: FTC Chair Lina Khan

A day after the US Federal Trade Commission and 17 states filed a landmark antitrust case against online retail giant Amazon (AMZN), the agency’s chair Lina Khan said is depriving online superstore competitors of the critical mass needed to compete.

“In short, Amazon has a policy that punishes sellers or retailers that lower their price anywhere other than Amazon,” Khan said in an interview Wednesday with CNBC. “At the same time, Amazon is also steadily hiking the fees the seller pays. Sellers have to inflate their price not just on Amazon, but also across the rest of the internet.”

The novel argument is expected to be a tough one for the agency.

FTC filed an antitrust case against Amazon on Tuesday. (AP Photo/Paul Sakuma)
FTC filed an antitrust case against Amazon on Tuesday. (Paul Sakuma/AP Photo) (ASSOCIATED PRESS)

Antitrust law, designed to protect consumers through open competition, regards low prices as evidence that consumers' interests are served. While the agency admits that Amazon's policies push sellers to offer their products at the lowest prices on Amazon, it argues Amazon’s prices never dip as low as they would in a genuinely competitive market.

The company’s scale, the FTC claims, ensures that some sellers must sell on to survive. And with the market cornered, it slowly increased fees charged to sellers for each sale, according to the agency.

“The consequences of that are very serious for sellers who now pay one out of every $2 to Amazon,” Khan told CNBC. “So this is effectively a 50% tax that businesses pay to Amazon to reach shoppers. And that, in turn, leads prices and it inflates prices across the internet.”

The FTC says Amazon is illegally monopolizing two markets: online superstore retail — where consumers shop for products — and online superstore retail services — where sellers list, sell, and ship their items.

Amazon responded to the FTC’s complaint saying the agency's theory is wrong.

“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 that sell in Amazon’s store," David Zapolsky, Amazon senior vice president of global public policy and general counsel, said in a statement.

"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.”

At Amazon's request, portions of the FTC's claims were redacted from the publicly filed version of its lawsuit. In her interview on Wednesday, Khan said the complaint contains direct evidence of Amazon hiking prices and steadily increasing fees charged to its third-party sellers.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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