U.S. Accuses Amazon of Illegally Protecting Monopoly in Online Retail

The Federal Trade Commission and 17 states accused Amazon on Tuesday of illegally protecting a monopoly over swaths of online retail by squeezing merchants and favoring its own services, in the government’s most significant challenge to the power of the e-commerce giant and one that could alter the way Americans shop online for everything from toilet paper to electronics.

In a highly anticipated lawsuit, the F.T.C. and state attorneys general from New York and other states said that Amazon had stopped merchants on its platform from offering lower prices elsewhere and forced them to ship products with its logistics service if they wanted to be offered as part of its Prime subscription bundle. Those practices led to higher prices and a worse shopping experience for consumers, the agency and states said.

“Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition,” said Lina Khan, the chair of the F.T.C.

The lawsuit put the influence and reach of Amazon, a $1.3 trillion behemoth, squarely in the spotlight after years of mounting scrutiny. Founded by Jeff Bezos in 1994, the onetime upstart online bookseller has grown into a sprawling conglomerate with tentacles in retail, Hollywood and the foundational infrastructure of the internet.

Much of the Seattle-based company’s power has emanated from its online marketplace, sometimes known as an “everything store” for the range of products it sells and the speed with which it delivers them. Amazon’s sway over online commerce has shaped the lives of merchants around the world, set the working conditions for more than one million warehouse workers and pushed the U.S. Postal Service to deliver on Sundays.

Now Amazon, the nation’s second-largest private employer, has become the latest big tech company to face off against the government over monopoly concerns, just as the Justice Department has entered the third week of an antitrust trial challenging Google over its power in online search. The F.T.C. has also brought an antitrust lawsuit against Meta, which owns Instagram, Facebook and WhatsApp. Members of Congress have considered legislation to regulate some of the companies’ most common business practices.

The new lawsuit pits Amazon directly against Ms. Khan in a long-awaited confrontation. She rose to fame as a Yale law student in 2017 when she published a paper arguing that American antitrust laws had failed to adequately stop Amazon from amassing power over its customers, competitors and suppliers. The paper helped kick off a debate about whether U.S. antitrust laws needed to be modernized to rein in tech giants.

Even so, much of the campaign against the tech giants has moved slowly. The monopoly cases may take years to resolve, while no new regulations have been passed in Congress. Foreign governments — particularly the European Union — have been more aggressive, approving rules governing how the tech companies handle personal data, treat their competitors and police harmful content.

Amazon, which generates more than $500 billion in annual revenue, has continued growing despite the scrutiny. In the past three years, it bought One Medical, a chain of primary care practices; the Roomba manufacturer iRobot; and the fabled movie studio Metro-Goldwyn Mayer, giving it a major stake in the James Bond franchise. These deals have added to an empire that includes its online superstore, cloud computing services that power wide areas of the web and a streaming service that competes with rivals like Netflix.

Karen Weise contributed reporting from Seattle.