Amazon and FTC set to square off in ‘Economics Day’ hearing in Seattle federal court

Amazon and the U.S. Federal Trade Commission will get a chance to educate the federal judge in the FTC’s antitrust case against the tech giant on the economic principles behind their respective positions Friday in U.S. District Court in Seattle.

Judge John H. Chun asked for the “Economics Day” hearing with the goal of being “as educated as possible regarding the economic theories in the case,” according to court filings. While the presentations could ultimately influence the judge’s perspective on the issues, no decision is expected to result directly from the hearing.

The landmark case was originally filed in September 2023.

The FTC alleges that Amazon maintains monopoly power by engaging in anti-competitive practices that harm consumers and sellers. Amazon disputes the FTC’s market definitions and counters that its business practices are not only lawful but also benefit both consumers and sellers.

The hearing comes at a time of transition for the FTC, with Andrew Ferguson appointed as chairman by President Trump in January, taking over for Lina Khan, who filed the suit against Amazon. Ferguson is expected to keep pursuing antitrust cases such as the one against Amazon, but he may be less inclined to embrace some of the more novel legal theories and approaches pursued under Khan’s leadership.

In filings in advance of the hearing, the FTC and Amazon laid out their respective positions on the key issues — including the competitive landscape, Amazon’s market power, and the company’s business practices.

Relevant markets: The FTC contends there are two relevant markets where Amazon has monopoly power: the “Online Superstore Market” for consumers, and the “Online Marketplace Services Market” for third-party sellers.

Whether or not the judge accepts these definitions will ultimately be key to the FTC’s case, because their relatively narrow scope is what makes it feasible for the agency to demonstrate Amazon’s market power.

Amazon argues for a much broader definition of the relevant markets, including online and brick-and-mortar retailers such as Walmart, Target, Nordstrom, Macy’s, Kohl’s, Kroger, Costco, Walgreens, Best Buy, and Wayfair, as well as local shops.

The company argues that the FTC’s definition of “online superstores” doesn’t make sense, because consumers regularly purchase different products from various retailers and channels, depending on the situation.

Monopoly power: The FTC alleges that Amazon has monopoly power in the defined markets due to the company’s large market share and significant barriers to entry and expansion by competitors.

As evidence of this power, it points to Amazon’s alleged ability to raise seller fees without losing sellers, and its approach to advertising on Amazon.com, which the agency argues has degraded search result quality.

Amazon contends that it does not possess monopoly power, crediting its success to its long-term innovation and ability to compete, and its focus on customer satisfaction and low prices.

The company points to the successful entry and growth of online retailers like Temu and Shein, as well as the expansion of established retailers’ online presence, as evidence of low barriers to entry and expansion. It also cites its investments in innovation as inconsistent with the behavior of a monopolist resting on its laurels.

Amazon’s conduct: The FTC describes Amazon’s practices as “anticompetitive” or “exclusionary” conduct that harms competition. It alleges that Amazon’s tactics prevent rivals from gaining the necessary scope to compete effectively, citing the impact on price, selection, and quality.

Amazon says its practices reflect “competition on the merits” that ultimately improve its product and services, and benefit consumers.

“A vigorous competitive process naturally leads more efficient companies — those that provide consumers with what they want, at prices they like — to succeed where others may not,” the company writes in its filing. “The antitrust laws do not prohibit such competition and such success; to the contrary, they encourage it.”