FTC’s Amazon Lawsuit vs. Market Realities and the Facts

By SBE Council at 14 November, 2023, 3:09 pm

By Karen Kerrigan –

In 2022, U.S. small to mid-size businesses (SMBs) sold more than 4.1 billion products on Amazon. SMB sales made up 60% of total Amazon sales.

According to SBE Council’s most recent Small Business Checkup Survey Q3, 22% of small businesses reported that they sell on Amazon, and these small sellers report that 23% of their total sales, on average, are generated via the platform. Amazon is but one channel that some small business sellers use to reach customers and drive sales. These small businesses choose to sell on Amazon. Yet in its antitrust lawsuit against the platform, the Federal Trade Commission (FTC) makes incredulous claims about SMB sellers being fleeced and abused by Amazon. The lawsuit not only makes inaccurate assumptions, but assumes that small businesses have limited choices to reach customers or what types of tools they decide to voluntarily use to generate and process sales.

Various voices have pushed back against the FTC’s misguided and inaccurate claims. Small business owners themselves, in terms of reporting how they sell and what channels they use – (based on their need to “meet customers where they are”) paint a very different market landscape then the imaginative one conveyed by the FTC’s Lina Khan and her fellow antitrust regulators.

For example, Amazon small business sellers use a wide array of channels to market and sell their products, according to our checkup survey:

For these sellers, there is intense concern about the FTC’s lawsuit and how breaking up Amazon, or significantly altering its business practices would harm small-seller access to the marketplace and the services offered by Amazon.

Did the FTC consider market realities and how small business sellers view the marketplace, based on their experiences and engagement, not on theories or hypotheticals? Did FTC officials talk to a wide number of small business sellers about the validity of its claims against Amazon to probe the value they receive for their services? In this blog post, we provide a roundup of why and how the FTC comes up short in its lawsuit and assumptions, and various effects on small business sellers if the lawsuit is successful.

What They Are Saying (WTAS)

FTC Flubs the Facts, Project Disco

This FTC’s case against Amazon is based on inaccurate assessments. Their allegations appear to misconstrue how Amazon’s fulfillment programs, the FBA [Fulfillment by Amazon] and SFP [Seller Fulfilled Prime] work, and seem to disregard the benefits they bring, not only to consumers, but to sellers as well. If the FTC succeeds in this complaint it could gravely injure the online marketplace.

The SFP program is intended to support and benefit Amazon sellers that cannot or do not wish to enroll in FBA but still want to make Prime eligible offers. While FBA is a more popular option for many sellers, the SFP program is an opportunity for businesses for whom FBA is not a viable or desirable option (in the case where a seller might want full control over the shipping of their products).

The FTC complaint doesn’t seem to recognize how beneficial the SFP program is for SMBs as it gives them much more freedom and independence to develop their business and logistics service if they desire. FTC Chair Khan has also mischaracterized the fees sellers pay to Amazon for which they receive shipping, logistics, and additional benefits that allow them to increase sales and grow their businesses.

The complaint states, among other claims, that Amazon forces sellers to “fulfill Prime orders themselves, without using independent fulfillment providers.” The Agency further claims that Amazon conditions “Prime eligibility on FBA usage” to ensure that Prime subscribers receive quality shipping. As previously mentioned, this not only is factually incorrect, but it misrepresents Amazon’s fulfillment services.

The FBA program allows sellers to outsource the two-day delivery promise to Amazon, ensuring their offers can be eligible for the Prime badge. On the other hand, the SFP program allows sellers to fulfill the orders themselves, through third party logistics services such as FedEx, USPS or UPS. In this case, Amazon is not in charge of the logistics behind the fulfillment of the order. When a seller chooses SFP, they are responsible for fulfilling the delivery promise.

The FTC’s Misguided Assault on Amazon Endangers Small Business Success, United States Hispanic Business Council (via RealClearPolicy)

Amazon is accused of forcing sellers to use its fulfillment services. Although Amazon sellers can use their own fulfillment services, many choose Amazon’s because of its exceptional value, which includes two-day delivery across the country. This is a choice, not a coercion, and it benefits both buyers and sellers.

The FTC’s portrayal of Amazon as a giant crushing small businesses is far from the reality – the roughly 2 million small businesses that account for 60% of sales on Amazon are proof of that. Looking closer, 94% of them elect to use optional services like Amazon fulfillment because they recognize the value of affordable two-day shipping. The unvarnished truth is that Amazon is a critical stepping stone in the growth of millions of small businesses.

The FTC’s suit raises the question of whether we have become a society that punishes success at the expense of legitimate concerns. Entrepreneurship is the backbone of our economy, and this suit seems to attack it from all angles. Rather than targeting one of the most important tools for elevating small businesses, the FTC should focus on entities that continually harm our communities. Only through this adjusted attention can we ensure that the American economy remains a fertile ground for innovation and opportunity.

FTC’s Lawsuit Against Amazon Ignores Small Sellers: What Do They Really Think? NetChoice

After officially launching its lawsuit against Amazon for its Prime service in September, the FTC has made several public arguments about why it thinks this litigation is needed. One of its claims includes that the lawsuit may benefit sellers by forcing the company to reform its “Fulfilled by Amazon” benefit for participating sellers. 

However, the public comments of many small businesses who use the FBA service say otherwise. 

The FTC’s talking points vaguely speak of a problem, but we’re skeptical they are truly listening to sellers. We pulled these various public comments from sellers in their own words so their voices and experience can be heard, rather than be buried underneath regulators’ talking points:

Read more of what small sellers have to say here.

The FTC’s Case Against Amazon Has Already Flopped, U.S. Chamber of Progress (via DC Journal – Inside Sources)

Fulfillment by Amazon (FBA) is a component of Amazon’s business that allows third-party sellers and small businesses to store their products at Amazon fulfillment centers, taking the difficult coordination factor off sellers’ hands. Regulators in the EU and the United Kingdom have settled on the FBA issue because FBA is an optional tool worldwide that supports third-party sellers’ goals.

The popularity of Amazon among U.S. consumers raises additional questions about why Khan has pursued a warmed-over case against one of America’s favorite online marketplaces.

Amazon customers love two-day shipping. And third-party sellers and small businesses love the success they’ve found through Amazon’s marketplace services. The company’s clear benefits to consumers and businesses alike might be why the EU and UK have already settled similar claims against Amazon more amicably than Khan’s case.

Khan’s Retro Antitrust Agenda Imposes Hardship on the Small Business Ecosystem, Independent Women’s Forum

Randomly targeting big companies like Amazon simply because they are big players in an industry upends a philosophy that has guided the U.S. economy through decades of tremendous technological advancement.

Khan is ignoring the losses of popular services that consumers overwhelmingly value and the hardship imposed on the ecosystem of smaller businesses that depend on bigger entities for survival, to push her own agenda. Big companies become more efficient at delivering goods to consumers by investing in their own development. This leads to more choices, lower prices and better selections often than smaller competitors—a win for consumers. By investing $100 billion, Amazon has developed a jaw-dropping logistics apparatus of nationwide warehouses and fulfillment centers and transportation and delivery networks that can get packages to millions of consumers in as quickly as a few hours. Some 85% of users value Amazon Prime’s free one-day and two-day shipping, but Khan’s lawsuit places this service at risk.

Khan couldn’t be too serious about market competition either if she’s willing to pull the rug from under the two million small businesses that sell on Amazon–competing directly with the retailer’s products–or rely on its soup-to-nuts fulfillment services to get their goods in the hands of consumers. 

The FTC’s Amazon Antitrust Case Centered on Wildly Misleading Statistic, Reason

(That statistic is 95%)

Rather than trying to squeeze competition and harm consumers, Amazon seems to have taken proactive steps to make sure its customers were getting the Prime-level service they had paid for. This isn’t evidence of a monopoly; it’s a demonstration of how Amazon has become so successful: by putting customers first.

Amazon didn’t kill an alternative that was working for consumers as a way to entrench its monopoly further. It shut down a program that was clearly flawed and that threatened to undermine customer confidence in the Amazon brand, reconfigured it, and now has re-opened it with better controls in place.

Then again, it’s probably no surprise that the federal government is unfamiliar with that process.

Read SBE Council’s response to the FTC’s antitrust lawsuit against Amazon here: How to Destroy a Vibrant Small Business Ecosystem.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council