FTC v. Amazon – Three possible outcomes

Amazon is accused of “monopolist” practices, with several different potential impacts on the industry.

A lawsuit filed by Federal Trade Commission (FTC) and 17 states in the U.S. District Court in Western Washington on Sept. 26 alleges that Amazon uses anticompetitive and unfair strategies in ways that harm third-party sellers, rival retailers, and consumers.

It is much too soon to say how the suit will turn out, but broadly speaking there are three possible outcomes, each with its own ramifications for retail. Following are brief summaries of each outcome and what it could mean for other retailers.

Amazon wins

If Amazon either gets the suit dismissed or prevails against all charges in court, then the e-tailer will continue its reign as the most influential e-commerce retailer in North America (and among the most powerful in the world). Amazon’s status as a tech giant will also be enhanced, as its model of deploying a wide variety of interlocking solutions and services will be reinforced.

Beyond Amazon, a ruling (or dismissal) that is entirely or predominantly in Amazon’s favor will also have a ripple effect that will spread throughout the e-commerce industry. The increasingly large number of retailers that operate third-party marketplaces will have legal justification to enact similar policies affecting their own third-party sellers and how search results and ads are served on their platforms.

This will be especially relevant to Tier I retailers like Walmart, which also operates its own robust hosted delivery and fulfillment services for third-party sellers and has an active technology development operation.

The FTC and states win

If a federal court determines that the FTC and 17 states participating in the suit are entirely or mostly in the right, the U.S. e-commerce landscape will change significantly, both for Amazon and other online retailers.

Amazon would have to dramatically change how it manages third-party sellers on its site. It would need to open up free choice of distribution providers with no impact on Prime eligibility and also amend its search and advertising algorithms so that its own products are not inherently favored or promoted.

Potentially court oversight could extend into other areas where Amazon mingles its proprietary solutions and services with its e-commerce operations, such as its Amazon Web Services hosted cloud platform and its burgeoning artificial intelligence program.

Conversely to the results of an Amazon victory, an Amazon loss would similarly affect how other retailers like Walmart manage third-party marketplaces, e-commerce site search and ad algorithms, and hosted services and solutions.

Companies like Amazon and Walmart would still dominate the U.S. e-commerce space, but possibly there would be a little more chance for some smaller players to gain marketshare.

Mixed judgment

A mixed judgment could mean a number of different outcomes, so it is more difficult to predict what might happen. But presumably it would mean something like Amazon being ordered to open up fulfillment options but allowed to retain its method of serving search and ad results, or vice versa.

The end result would probably not significantly alter the current state of U.S. e-commerce, but could potentially result in the emergence of a new player in the hosted fulfillment space, for example.