The Federal Trade Commission’s (FTC) antitrust suit against Amazon, originally filed in October 2023, is scheduled for trial in October 2026. In the meantime, the U.S. District Court for the Western District of Washington has scheduled a March 7 “economics day” hearing to focus on fundamental economic concepts that will shape the case—including the crucial question of market definition.
Market definition serves as the starting point for antitrust analysis. Before a court can determine whether a company has monopoly power or has engaged in anticompetitive conduct, it must first identify the relevant market in which the firm operates. This seemingly technical exercise serves to determine the lens through which the entire case will be viewed.
Think of market definition as drawing the boundaries of a competitive playing field. Draw the boundaries too narrowly, and a company might appear to dominate a tiny space, while actually facing robust competition in a broader market. Draw them too broadly, and even genuinely problematic market power might be obscured by including distant, barely relevant competitors.
In the Amazon case, the FTC’s market definitions are particularly important because they effectively determine whether Amazon will be judged as:
- A dominant force in tightly defined online-retail segments (the FTC’s view); or
- One player among many in the broader retail ecosystem (likely to be Amazon’s view)
But what are the specific markets the FTC has purported to define? And how will they be contested as the case moves forward?
The Online Superstore Market
The FTC describes this market to comprise online retailers that offer “extensive breadth and depth” of products. Key characteristics of the market include:
- A wide range of product categories (electronics, home goods, clothing, etc.);
- Multiple options within each category (various brands, price points);
- Online-specific features, such as 24/7 availability and sophisticated search tools; and
- A consolidated shopping experience that reduces transaction costs.
Crucially, the FTC explicitly excludes specialty online stores that offer only a limited selection, and perishable-grocery categories, as well as any sales from a brick-and-mortar store. They do include online sales from select wide-ranging retailers like Walmart.
The commission argues that these excluded retailers don’t offer shoppers the same ability to use an online superstore as a “single destination… to browse a large and diverse selection of goods from multiple brands across a wide range of categories.” According to the complaint, consumers value the ability to purchase different types of products in a single session with unified search capabilities, checkout systems, and post-purchase support.
Using this definition, the FTC calculates that Amazon controls approximately 82% of the online superstore market. This figure represents Amazon’s share of gross merchandise value (GMV) among what the FTC considers to be online superstores—essentially Amazon, Walmart’s online operations, Target’s online operations, and eBay.
The Online Marketplace Services Market
The FTC’s second relevant market focuses on services provided to third-party sellers, including:
- Access to a substantial U.S. customer base;
- Consumer-search capabilities;
- The ability for sellers to set prices and create product listings; and
- Customer-review systems.
The FTC excludes:
- Traditional vendor relationships (where sellers act as suppliers to retailers);
- Software-as-a-service (SaaS) providers like Shopify (the commission claims they don’t provide built-in shopper access); and
- Services that primarily target non-U.S. shoppers.
The commission argues these alternatives aren’t reasonably interchangeable with online marketplace services. For instance, the complaint suggests that SaaS providers don’t offer immediate access to an established shopper base, requiring sellers to invest in their own marketing.
In this market, the FTC alleges Amazon controls over 70% of sales, again measured by GMV.
Challenges to the FTC’s Market Definitions
Amazon will certainly contest these market definitions. We do not yet know what their response will be, but their arguments will likely center on several intertwined points.
Artificially Narrow Boundaries
By defining the markets so narrowly, the FTC may be inflating Amazon’s market share. For perspective, while Amazon appears dominant in the FTC’s “online superstore” market, its share of total U.S. retail (online and offline) is around 38% of e-commerce and just 5-7% of total retail.
This distinction matters enormously. If the relevant market is “all retail,” rather than “online superstores,” Amazon’s position looks far less dominant. Similarly, if the market for seller services includes brick-and-mortar distribution channels, Amazon’s share would be substantially smaller.
Excluded Competitors
The FTC’s definitions leave out significant potential competitors:
- Major specialized online retailers (Nike.com, Wayfair, etc.);
- E-commerce aggregators and search tools (Google Shopping);
- Social-commerce platforms (Instagram shopping); and
- SaaS providers that enable direct seller-to-consumer relationships (Shopify, which hosts more than 800,000 merchants).
Take Nike.com, as one concrete example. In 2019, Nike stopped selling products on Amazon because it was dissatisfied with Amazon’s efforts to limit counterfeit products. Instead, Nike focused on direct-to-consumer sales through its own website and other retail partners. This real-world substitution suggests that these alternatives can constrain Amazon’s pricing and policies—exactly what market definition is supposed to capture.
The ‘Cluster Market’ Problem
The FTC groups dissimilar products (like furniture and batteries) into a single market. While courts sometimes accept this “cluster markets” approach for administrative convenience, it requires showing similar competitive conditions across products or that consumers purchase them as a bundle.
The classic example is in health care, where courts have treated “acute inpatient hospital services” as a cluster market, despite the fact that heart surgery and appendectomy services don’t compete with each other. This is accepted, in part, because plan sponsors do transact for these services collectively to offer to insured members.
The FTC will need to demonstrate why products as diverse as sporting goods and kitchen appliances should be analyzed together. Are the competitive conditions for selling bedroom furniture actually similar to those for selling consumer electronics? Do consumers actually value the ability to purchase these dissimilar products together, or is it merely convenient for the FTC’s case? Similarly, because the FTC’s market definition turns, in part, on a distinction between online and offline sales, do consumers really view offline retail alternatives the same way for furniture as for, say, paper towels?
The complaint offers limited evidence on these questions. It doesn’t analyze cross-elasticities of demand across product categories or provide empirical support for treating these products as a cluster. We discuss the difficulties with alleging cluster markets in more detail here.
Two-Sided Platform Considerations
The U.S. Supreme Court’s Ohio v. American Express decision established that, when considering two-sided platforms, effects on both sides of the market must be considered. Amazon may argue that the FTC’s approach artificially separates the buyer and seller sides of its platform, ignoring how practices that might harm sellers could benefit consumers (and vice versa).
For example, one FTC allegation involves Amazon’s requirement for sellers to use its fulfillment services to qualify for Prime. This might seem to burden sellers with higher costs, but it could also ensure reliable delivery experiences for consumers. Under Amex, courts must consider both effects, rather than focusing exclusively on purported seller harm.
Brick-and-Mortar Competition
The FTC’s exclusion of physical retail from its market definition appears particularly vulnerable to challenge. While the online and offline shopping experiences may differ, consumers regularly substitute between these channels. A consumer looking for a specific product might check Amazon, then visit a local store if the price is better or if they need the item immediately.
The rise of omnichannel retail further blurs these boundaries. Retailers like Walmart and Target offer online ordering with in-store pickup, same-day home delivery, and seamless returns across channels. These hybrid models call into question whether “online” and “offline” retail are truly separate markets.
Implications for the Case
Market-definition debates might seem like technical squabbles, but they have profound implications for antitrust law. If the court accepts the FTC’s narrow market definitions, it becomes much easier to establish Amazon’s monopoly power and potentially illegal conduct. But as we have pointed out, “the odder the construction, the more likely it is to strain the court’s credulity.” By defining markets so narrowly, the FTC may have created an uphill battle for itself.
For example, courts have shown skepticism toward narrowly defined markets, especially when they appear to be strategically crafted for enforcement actions. A key example is FTC v. RAG-Stiftung, where a court rejected the FTC’s narrow market definition for non-electronics-grade hydrogen peroxide. The court found the FTC’s approach, which relied on supply substitution to define this narrow market, to be flawed and expressed skepticism about market definitions that deviate from the traditional focus on demand substitution. The FTC may face a similar challenge in the Amazon case if its market definitions are seen as similarly narrow and lacking a strong basis in demand-side realities.
To win on its market definitions, the FTC will need to provide empirical evidence that consumers and sellers don’t readily substitute between Amazon and excluded alternatives. This typically involves economic analysis of cross-elasticity of demand or natural experiments showing limited substitution.
For instance, in the Staples/Office Depot merger case, the FTC presented evidence that office-supply prices were higher in areas without competing office superstores, suggesting limited competition from other retailers. The FTC will likely need similar evidence showing that Amazon’s prices or policies aren’t constrained by the competitors the agency has excluded from its market definitions.
Looking Ahead
As the case moves forward, both sides will present extensive economic testimony on market definition. The upcoming March 7 hearing, as outlined in the parties’ joint statement, will address fundamental questions that include:
- How economists define relevant antitrust markets;
- Economic principles that apply to market definition;
- Types of qualitative and quantitative evidence that can inform market definition; and
- How to assess monopoly power and barriers to entry.
This hearing will provide the first detailed look at how both sides approach these crucial market-definition issues and how receptive the court may be to their arguments.
The outcome of this market-definition dispute won’t affect just Amazon; it could establish a precedent for how we analyze competition in digital-platform markets for years to come. If courts accept narrow markets tailored to particular business models, it could facilitate more aggressive antitrust enforcement against tech platforms. If courts reject such approaches in favor of broader, more traditional market definitions, it could limit the scope of successful monopolization claims against digital platforms.
Whatever the result, the Amazon case will likely become a landmark in how antitrust law addresses the complexities of digital markets and multisided platforms. The market-definition battle represents not just a technical dispute, but a fundamental question about how we conceptualize competition in the modern economy.
