The Federal Trade Commission’s lawsuit announced against Amazon.com Inc. last week and a Justice Department suit against Google LLC are seen by some as an indication that the executive branch is moving to correct what it considers market distortions in areas where Congress has not acted on antitrust issues.
The FTC lawsuit alleges that Amazon squeezed out competitors to maintain monopoly power. In the U.S. v. Google trial that began last month, the Justice Department is alleging that the search engine company stomped out competition. “What would have happened if Congress had actually enacted bipartisan legislation?” said Maurice Stucke, a professor at the University of Tennessee College of Law and a former Justice Department antitrust lawyer. While that answer is unclear, the lawsuits rest on how U.S. courts interpret key provisions of the Sherman Act, a 19th century law that governs monopolies and unfair practices, Stucke said in an interview.
“Legislators aren’t really doing anything,” Stucke said, adding that the agencies are trying to go back to the legislative aim of older laws. “They’re facing resistance from the courts,” he said, referring to recent decisions by the Supreme Court relying on the so-called major questions doctrine to invalidate actions by executive agencies. The doctrine says decisions of major national significance need clear congressional authorization.
Two bipartisan antitrust bills aimed at digital marketplaces were approved by the Senate and House Judiciary committees in 2022 but didn’t get floor votes despite a push by lawmakers of both parties.
The push to enact new antitrust laws for the digital age gained momentum after the House Judiciary Committee conducted a 16-month investigation. In October 2020, it issued a report finding that the top four tech platforms — Amazon, Apple, Facebook and Google — had amassed market power and exerted significant influence to weaken competition.
The report found that the tech giants “not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them.” The report also found that “each platform uses its gatekeeper position to maintain its market power.”
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THE ALGORITHM NOVELTY
Although both cases allege monopolistic and anti-competitive behavior, the FTC’s case against Amazon includes a novel aspect alleging the company used a pricing algorithm to stifle competition and potentially overcharge customers, Stucke said.
“This is the first time there has ever been an allegation involving a monopolist using pricing algorithms to soften competition,” Stucke said.
The FTC, in a heavily redacted complaint, said Amazon used a system called Project Nessie to compete unfairly, and that the company had “no valid and cognizable justification” for using the tool.
“Amazon’s Project Nessie has already extracted over [redacted] from American households,” the FTC complaint says. “In addition to overcharging its customers, Amazon is degrading the services it provides them.”
Jason Del Rey, whose book “Winner Sells All” delves into the retail giant, on social media site X describes the Amazon algorithm as a pricing tool “that would repeatedly lower the price on an item to match its competitor.” Del Rey, citing an Amazon spokesman, noted that Amazon later stopped using it.
Amazon has rejected the FTC’s allegations, saying the suit “reveals the Commission’s fundamental misunderstanding of retail” business online.
The Justice Department’s case against Google deploys elements of behavioral economics as it argues the company created a bias to nudge consumers toward its search engine over others, Stucke said.
Google contested the claim, arguing that making its product the default by itself would not be enough to keep customers if the search engine was inferior.