Why the FTC Is Investigating Amazon — and Why Amazon Is Biting Back
The Federal Trade Commission (FTC) is investigating Amazon’s Prime subscription business, and Amazon is biting back. Here's what we know.
Aug. 17 2022, Published 11:55 a.m. ET
As the Federal Trade Commission (FTC) continues its ongoing investigation into Amazon Inc. (AMZN), the company is biting back. CEO Andy Jassy, along with founder and executive chairman Jeff Bezos, is claiming harassment from the federal agency.
Spearheaded by chair Lina Khan, the FTC is targeting monopolies in ways American companies aren't used to. The investigation is causing friction with Amazon executives, who say the FTC’s requests are “unusual and perplexing.”
Amazon executives claim the FTC is harassing them.
The FTC’s investigation into Amazon Prime and related subscription services the company owns are misleading customers in the sign-up and cancelation process. As a result, the FTC wants Jassy and Bezos to testify in front of officials.
In a petition to quash FTC demands, Amazon wrote, “[The FTC] identified no legitimate reason for needing [Jassy and Bezos’] testimony when it can obtain the same information, and more, from other witnesses and documents.”
Amazon wrote that the FTC investigation has been “unusual and perplexing,” adding that “the current impasse has been brought about by unexplained pressure placed on [FTC staff] to complete the investigation hastily, by an arbitrarily chosen deadline.”
The company alleges the agency’s testimony request for Amazon executives is “grossly unreasonable, unduly burdensome, and calculated to serve no other purpose than to harass Amazon’s highest-ranking executives and disrupt its business operations.”
Why is the FTC investigation happening?
The FTC investigation against Amazon suggests the company allegedly misled investors about its Prime subscription service. Amazon, which charges $14.99 per month for its Prime subscription, reportedly manipulated customers into signing up for Prime while making the cancelation process opaque.
In June, the FTC expanded the scope of the investigation to include other subscription services that Amazon owns, including Audible, Amazon Music, Kindle Unlimited, and Subscribe & Save. A reported 20 current and former Amazon employees have been subpoenaed to testify in the investigation, including Jassy and Bezos.
Will Jassy and Bezos skirt testifying in the FTC investigation?
Amazon’s disdain for the FTC isn't a coincidence. Khan’s 2017 Yale Law Journal article made an example of Amazon as a monopolistic force in the U.S. and global economy. Titled Amazon’s Antitrust Paradox, it homed in on Amazon’s digital markets that have woven themselves through antitrust regulation largely scotch-free.
Because of this, Amazon is under the impression the FTC, under its current administration, is out to get it. That may not be entirely untrue, but the FTC may have a good reason for investigating with such scrutiny. Amazon has a $1.44 trillion market capitalization and has acquired four companies so far in 2022 alone (Strio.AI, GlowRoad, One Medical, and iRobot). In 2017, the year of Khan’s article, Amazon bought 12 companies in their entirety.
Whatever the case, Jassy and Bezos will do all they can to avoid testifying in front of the FTC. Meanwhile, the FTC will continue attempting to “[show] these companies, but also [show] the country, that enforcers are not going to back down because of these companies flexing some muscle or kind of trying to intimidate us,” as Khan said in a January interview.