Amazon’s antitrust suit culmination of years of work from FTC’s Khan

Amazon (AMZN) is facing an antitrust lawsuit that may have been years in the making from current FTC Chair Lina Khan. Going as far back as her time in law school, Khan argued that the current antitrust laws don't do enough to police big tech companies, with Amazon as the center of her thesis. Yahoo Finance's Rachelle Akuffo and Akiko Fujita break down the details of the lawsuit as well as statements from both sides of the case.

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Video transcript

AKIKO FUJITA: One of the stocks we're watching this morning, Rachelle, is Amazon. That stock pulling back just slightly at least early on in the session. This coming as Federal Trade Commission Chair Lina Khan arguing for years that federal regulators need to take on big tech. Now she's taking on the heavyweight Amazon with a sweeping antitrust lawsuit filed yesterday.

Rachelle, we've kind of been looking through that lawsuit but, of course, the backstory adds intrigue to the case when you consider the current FTC chair, of course, as a law student at Yale wrote this very extensive article titled "Amazon's Antitrust Paradox." Here she is six years later bringing forward this case against Amazon.

We should mention the lawsuit-- this current lawsuit from the FTC specifically argues that Amazon is driving up prices for consumers through anticompetitive behavior. We've talked about these Amazon fees, as she sees it, that says third party sellers are required to pay $1 out of every $2 to Amazon to reach consumers.

Now, separately, Lina Khan cites Amazon policy that she argues punishes sellers who lower prices for products on other sites-- sites other than Amazon. All of that, she argues, amounts to inflated prices. Now, I've been speaking to legal experts by the way, Rachelle. I'm going to count our very own Alexis Keenan among them because, you know, there's going to be a lot made about what Lina Khan argued as a law student versus what is being argued now.

Now, as a law student, she specifically sort of talked about broadly how current anti law-- antitrust law cases-- antitrust law that's in place isn't well equipped to police big tech giants like Amazon because of the sheer scale they compete on. There's an argument to be made that in the FTC case that was filed, it's much more narrow in its argument, and she goes specifically after pricing.

RACHELLE AKUFFO: And it was interesting because a lot of people were wondering if we were going to see the words "break up" mentioned there. Instead they sort of-- the lawsuit mentioned structural relief rather than some of these specific remedies about breaking up Amazon. But I mean, Khan was telling Bloomberg, look, this is about competition here.

But she also mentioned that it's about cumulative harm. So it's not just about changing a few tactics, it's that some of the things that have structurally been in existence, which is what's leading a lot of people to wonder how much of a breakup we're going to see but we didn't see her go as aggressively as expected. Business Insider, I think, for their banner went with, the wrath of Khan. Clearly something that was in the making as you mentioned there that she talked about in her thesis. I did think Amazon's response was interesting. They're saying that the lawsuit actually is the antithesis of what antitrust law is supposed to do.

David Zapolsky, who is Amazon's general counsel, saying that if the FTC gets its way, the result will be fewer products to choose from, higher prices, slower deliveries for consumers, and reduced options for small businesses, also calling the lawsuit wrong on the facts and the law, and saying they look forward to making the case in court.

Something I did find interesting was that when you think of Andy Jassy, who's now at the head here-- obviously executive chair is still Jeff Bezos-- but the redacted complaint mentions Bezos 16 times and Andy Jassy twice, so this is something that Jassy inherited, but it was something that they obviously saw coming down the pipeline, Akiko.

AKIKO FUJITA: Yeah, I mean, that's a good point to make because it isn't just about Amazon over the last few years. It is about Amazon collectively and the strategy they've pushed forward, at least as Lina Khan and the FTC sees it. There's an argument to be made here that Lina Khan is taking more of a pragmatic approach in this particular lawsuit when you compare it to what she was arguing as a lawsuit.

Some would say, well, that's partly because of the setbacks that the FTC has suffered recently. You'll recall there was a case that the FTC brought forward to try and block a merger for Meta slash Facebook. They didn't necessarily win that case there's also the Microsoft Activision merger the FTC tried to block that's still ongoing but at least the initial phase it didn't go the FTC's way. So in many ways, you could argue that's kind of been a lesson-- multiple lessons, you could say, for Lina Khan, and that's partly why she's taking a very narrow scope in this particular case against Amazon.

Of course, Rachelle, as we've learned, you know, these are cases that take not just months but years, so we can't say, well, which side is going to have the stronger argument, at least in the initial phase. But certainly one that's going to be watched very closely given just the sheer scale that Amazon competes on right now.

RACHELLE AKUFFO: Indeed. And when you think of where Amazon started to where it is now, I mean, it's light years apart from that, so it'll be interesting to see how that plays out. Of course, Yahoo Finance will be tracking that closely for all of you as well.