FTC, States File Antitrust Suit Against Amazon

The Federal Trade Commission and 17 state attorneys general on Sept. 26 filed suit against Amazon.com Inc., accusing the giant online retailer of becoming a “monopolist” that uses its power to squash rivals and hurt consumers.

The suit, which had been widely expected, accuses Amazon of using its clout to “stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.”

Amazon remains one of the biggest retail sellers of DVDs and Blu-ray Discs, accounting for 15% of the market. Give the latest estimates that consumers spend just over $2 billion a year on disc purchases, that comes out to $300 million in annual consumer spending. 

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” FTC Chair Lina M. Khan said in a statement. “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.”

“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, deputy director of the FTC’s Bureau of Competition, in a statement. “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”

The FTC and states allege Amazon’s anticompetitive conduct occurs in two markets — its own online store and the “marketplace” for third-party sellers. In the former case, Amazon buys wholesale directly from the manufacturer; in the latter case, Amazon provides a platform and technology for independent sellers to engage in e-commerce, and in return takes a percentage of each sale and also charges various fees for services such as placement and advertising.

Among the tactics Amazon is accused of, according to the suit:

  • “Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping prices higher for products across the internet. For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible.”
  • “Conditioning sellers’ ability to obtain ‘Prime’ eligibility for their products — a virtual necessity for doing business on Amazon — on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon.”

According to an FTC news release, “Amazon’s illegal, exclusionary conduct makes it impossible for competitors to gain a foothold. With its amassed power across both the online superstore market and online marketplace services market, Amazon extracts enormous monopoly rents from everyone within its reach.”

This includes, according to the FTC:

  • Degrading the customer experience by replacing relevant, organic search results with paid advertisements — and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase.
    Biasing Amazon’s search results to preference Amazon’s own products over ones that Amazon knows are of better quality. 
  • Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. These fees range from a monthly fee sellers must pay for each item sold, to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon. These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon.  


“The FTC, along with its state partners, are seeking a permanent injunction in federal court that would prohibit Amazon from engaging in its unlawful conduct and pry loose Amazon’s monopolistic control to restore competition,” according to regulators.

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The FTC lawsuit was joined by Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin. The commission vote to authorize staff to file for a permanent injunction and other equitable relief in the U.S. District Court for the Western District of Washington was 3-0.

Microsoft Response to FTC Lawsuit: Activision Acquisition Expands Video Game Access to More Consumers

Microsoft has responded to the Federal Trade Commission’s lawsuit seeking to block the software giant’s $69 billion acquisition of Activision Blizzard, publisher of the popular “Call of Duty” video game franchise.

The FTC, earlier in December after a 3-1 vote said the mega merger would enable Microsoft to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.

Microsoft, in a Dec. 22 legal filing, countered that the acquisition would in fact expand consumer access to Activision’s portfolio of video games.

“The acquisition of a single game by the third-place console manufacturer cannot upend a highly competitive industry,” Microsoft wrote in the filing. “That is particularly so when the manufacturer has made clear it will not withhold the game. The fact that Xbox’s dominant competitor has thus far refused to accept Xbox’s proposal does not justify blocking a transaction that will benefit consumers.”

That competitor is Sony Interactive Entertainment, whose PlayStation 5  has been the top-selling video game console since the the PlayStation brand inception. Sony contends the deal would favor the Xbox console and Xbox Game Pass streaming service over PlayStation, putting the latter at a competitive disadvantage.

Bloomberg earlier this month reported that Microsoft was willing to let Sony sell the “Call of Duty” franchise titles on its PlayStation streaming service. While the FTC trial is set to take place in 2023, the merger is also getting antitrust pushback from regulators in the U.K. and the European Union.

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Analyst: U.S. Government Gave Microsoft Roadmap to Circumvent Activision Antitrust Concerns

On the heels of the Federal Trade Commission’s complaint against Microsoft’s $69 billion acquisition of video game publishing giant Activision Blizzard citing antitrust concerns, the government laid out a potential roadmap for Microsoft to appease regulators, according to Wedbush Securities analyst Michael Pachter.

The government, in its complaint, alleged Microsoft, which sells the Xbox video game console, published titles, in addition to branded online gaming platforms, could manipulate Activision’s pricing of its games across the Xbox ecosystem, degrade the quality of Activision games or player experiences offered on competitor consoles, i.e. Sony PlayStation 5, change the terms or timing of access to Activision content, and/or withhold Activision content from other consoles altogether.

Activision video game franchises include some of the biggest ever, including Call of Duty, Crash Bandicoot, Guitar Hero, Tony Hawk’s, Spyro, Skylanders, World of Warcraft, StarCraft, Diablo, Hearthstone, Heroes of the Storm, Overwatch and Candy Crush Saga.

Pachter contends that if Microsoft were to make the aforementioned changes, consumers would be indeed harmed. As a result, the analyst believes the software giant, in a binding legal obligation, could simply agree not alter the competitive landscape going forward.

“If Microsoft enters into a consent decree agreeing to address each of the FTC’s concerns, the case would be considered moot and the judge would be required to dismiss it,” Pachter wrote in a note to investors.

U.S. Government Seeks to Block Microsoft’s $69 Billion Acquisition of Video Game Giant Activision Blizzard

Consolidation within the lucrative video game industry has been put on hold.

The Federal Trade Commission Dec. 8 announced it is seeking to block technology giant Microsoft Corp. from acquiring video game developer Activision Blizzard, alleging that the $69 billion deal, Microsoft’s largest ever and the biggest in the video gaming industry, would enable the software behemoth to suppress competitors to its Xbox gaming consoles and its rapidly growing subscription content and cloud-gaming business.

The 3-1 vote, with Commissioner Christine S. Wilson voting against the complaint, is significant considering Xbox rival, Sony’s PlayStation 5, remains the biggest selling game console since its launch.

In a complaint, the FTC pointed to Microsoft’s record of acquiring and using gaming content to suppress competition from rival consoles, including its acquisition of ZeniMax, parent company of Bethesda Softworks (a well-known game developer). Microsoft decided to make several of Bethesda’s titles, including Starfield and Redfall, Microsoft exclusives despite assurances it had given to European antitrust authorities that it had no incentive to withhold games from rival consoles, i.e. Sony PlayStation.

“Microsoft has already shown that it can and will withhold content from its gaming rivals,” Holly Vedova, director of the FTC’s bureau of competition, said in a statement. “Today we seek to stop Microsoft from gaining control over a leading independent game studio and using it to harm competition in multiple dynamic and fast-growing gaming markets.”

Microsoft’s Xbox Series S and Series X are one of only three types of high performance video game consoles when including Nintendo. Importantly, Microsoft also offers a video game content subscription service called Xbox Game Pass, as well as a cloud-based video game streaming service, according to the complaint.

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Activision is one of only a very small number of top video game developers in the world that create and publish high-quality video games for multiple devices, including video game consoles, PCs and mobile devices. It produces some of the most popular video game titles, including Call of DutyWorld of WarcraftDiablo and Overwatch, and has millions of monthly active users around the world, according to the FTC. Activision currently has a strategy of offering its games on many devices regardless of producer.

But that could change if the deal is allowed to proceed. With control over Activision’s blockbuster franchises, Microsoft would have both the means and motive to harm competition by manipulating Activision’s pricing, degrading Activision’s game quality or player experience on rival consoles and gaming services, changing the terms and timing of access to Activision’s content, or withholding content from competitors entirely, resulting in harm to consumers.

In a public letter to its Santa Monica, Calif.-based employees, Activision CEO Bobby Kotick said he believes the transaction first announced in January will close.

“The allegation that this deal is anti-competitive doesn’t align with the facts, and we believe we’ll win this challenge,” Kotick wrote.

In the most recent fiscal quarter, overall consumer spending on video games, hardware and accessories dipped 5% to $12.34 billion, from $12.98 billion in the previous year period.

Kotick said he believes that a combined Microsoft-Activision would be good for players, employees, competition and the industry.

“Our players want choice, and this gives them exactly that,” he wrote. “We believe these arguments will win despite a regulatory environment focused on ideology and misconceptions about the tech industry.”