The Federal Trade Commission’s (FTC) antitrust suit against Amazon, originally filed in October 2023, is scheduled for trial in October 2026. While we’ve previously explored the market-definition questions at the center of this case, several other economic concepts will be equally important in determining whether Amazon has violated antitrust laws.
Ahead of a scheduled March 7 “economics day” hearing before the U.S. District Court for the Western District of Washington, both sides have filed statements outlining their views on the economic concepts that will be central to the case, providing a fascinating window into what will ultimately be a battle of economic theories when the case moves to trial. The FTC focuses on Amazon’s alleged exclusionary tactics that the commission contends prevent rivals from scaling and competing effectively. For its part, Amazon stresses that its business practices represent competition on the merits that benefit consumers through lower prices and better service.
In this post, we hope to offer interested observers a roadmap to the economic issues at play. We will explain the core economic concepts (beyond market definition) that will shape the case and the nature of the disagreement between the parties.
Monopoly Power: How Much Is Too Much?
In antitrust economics, monopoly power means a firm can profitably maintain prices above competitive levels (or quality below competitive levels) for a sustained period. The court will examine two types of evidence for Amazon’s alleged monopoly power.
The starting point will be the market definition and Amazon’s market share. The FTC claims Amazon dominates what they define as the “online superstore” market, with approximately 82% market share. Courts generally consider market shares of more than 70% as strong evidence of monopoly power, although this alone isn’t sufficient. If you accept the FTC’s market definition (a big “if”), this hurdle is likely cleared.
The more important step is actually demonstrating harm. After all, it is not illegal to have a large market share. For direct evidence, the FTC points to Amazon’s decisions about advertising and “self-preferencing” that allegedly “degraded the quality of the search results that customers receive,” as well as Amazon’s ability to “raise the fees it charges to sellers without losing sellers.” These claims will, however, require deeper scrutiny. Fee increases might reflect enhanced services or inflation, rather than market power, and search changes could represent revenue optimization that any retailer would pursue.
Amazon counters that “monopoly power means that a company does not face pressure to lower prices, invest in innovation, or enhance quality or customer service because it does not face competitive constraints from actual or potential competitors.” Amazon argues that its continuous innovation and investment contradict this definition, noting that “a monopolist is less likely to invest in innovation because the existence of a durable monopoly alleviates the need to incur such costs.” Competitors like Walmart have been successful in expanding their online presence; Amazon will likely point to that as evidence that competition remains robust.
At its core, the key economic question is whether Amazon’s large market share reflects monopoly power or simply superior efficiency and consumer preference. The complaint points to Amazon’s scale as a harm, but scale can be just another way to describe the firm that produces the highest-quality product at the lowest price. Economists will need compelling evidence that Amazon can actually charge higher prices than competitors or impose unfavorable terms without losing substantial business—something the FTC’s complaint asserts, but doesn’t conclusively demonstrate. This evidence, if it exists, will need to be presented at the trial stage.
Barriers to Entry: Why Can’t Others Compete?
Monopoly power becomes problematic when it’s durable, because competitors can’t easily enter or expand to challenge the dominant firm. The FTC argues that several economic forces create substantial barriers protecting Amazon’s position.
The value of Amazon’s marketplace increases with more participants, creating a self-reinforcing cycle for both sides of the market. Economists will call this a “network effect.” More sellers attract more buyers, which in turn attracts more sellers. But this theoretical barrier is questionable in practice. Many retailers have successfully built online marketplaces, despite Amazon’s head start. Walmart, Target, and even specialized retailers like Etsy have attracted both buyers and sellers, suggesting network effects are not insurmountable.
The question of scale is closely related to network effects. Amazon’s massive fulfillment network supposedly gives it cost advantages that smaller rivals struggle to match. These economies of scale can, however, actually benefit consumers through lower prices and better service. As we have written before, scale isn’t a harm. It’s like a network effect, conveying a benefit to both sides. Firms that achieve significant scale can leverage the resulting efficiencies to reduce costs and prices.
The question isn’t whether Amazon has scale advantages, but whether it artificially prevents competitors from developing similar scale through anticompetitive means, rather than simply through superior efficiency. That would be a harm.
According to the FTC, Prime memberships create customer loyalty and shopping habits that discourage consumers from using other platforms. This argument suggests that consumers are somehow locked into Amazon, yet the evidence for this is thin. Most online shoppers regularly use multiple platforms, and the minimal effort required to check prices or shop elsewhere undercuts claims of meaningful switching costs.
Amazon will likely argue that these factors reflect procompetitive efficiencies rather than anticompetitive barriers. The success of companies like Shopify (whose services enable direct-to-consumer commerce) and the rapid e-commerce growth by traditional retailers suggests the barriers are far more surmountable than the FTC portrays.
The economic analysis will need to distinguish between natural market forces that benefit consumers and artificial constraints that protect Amazon from competition. The FTC’s barrier claims may make for compelling theories, but demonstrating their real-world impact requires stronger evidence than the complaint currently provides.
The FBA/Prime Badge Relationship: Tying or Quality Control?
One of the most contentious issues in the case—and one of the most interesting economic questions—is Amazon’s alleged tying of its Prime badge to its Fulfillment by Amazon (FBA) service. There appears to be some confusion about how this argument is being framed.
Initially, the FTC came close to characterizing this as an illegal tying arrangement, where Amazon leverages its control over the Prime badge to compel sellers to use its fulfillment services. While the FTC avoided explicitly alleging tying, the commission describes Amazon’s conduct as “anticompetitive tactics” designed to “choke off competition in relevant markets,” and thereby preventing rivals from achieving the necessary scale to compete effectively.
The FTC’s exact theory of harm is complex. Rather than simply alleging Amazon uses retail-market power to dominate fulfillment services, the commission argues that Amazon effectively forces sellers to use FBA to gain the Prime badge, which is critical for marketplace success. This requirement makes it economically inefficient for sellers to use alternative fulfillment methods for other marketplaces, as doing so would require splitting inventory or duplicating fulfillment costs.
According to the FTC, this arrangement impedes competing platforms like Target or Walmart from attracting third-party sellers, who become locked into Amazon’s fulfillment ecosystem. If sellers could use independent fulfillment providers for multiple marketplaces, those providers could achieve greater scale, lower costs, and make multi-homing more feasible.
Amazon frames these same practices as solutions to economic problems of “free riding” and “externalities.” According to Amazon:
Free-riding arises when one company (here, a third-party seller) seeks to reap the advantages of investments made by another company (here, Amazon), but does not bear some or all of the costs.
Amazon argues its policies are designed “to ensure that all of the sellers in its store live up to Amazon’s reputation for a reliable and high-quality service as well as competitive prices.” For example, regarding the requirement that sellers use FBA to qualify for Prime, Amazon argues that this policy ensures reliable delivery times that maintain the Prime promise to customers.
Before COVID-19, a very small percentage of seller-fulfilled Prime orders met the two-day delivery promise that customers expect from Prime. This quality-control issue provides Amazon with a plausible justification for requiring FBA to maintain the Prime customer experience.
Competitive Effects: Do Consumers Benefit or Suffer?
In the original complaint, the FTC also claimed that Amazon penalizes sellers who offer lower prices elsewhere by demoting their products in search results. While this might theoretically prevent other platforms from competing on fees, it’s questionable whether this substantially harms competition. Most retailers—online and offline—expect similar treatment from their suppliers. Walmart, for instance, is known for demanding the lowest prices from vendors. The FTC must explain why Amazon’s version of this common practice suddenly constitutes illegal behavior.
The complaint alleges Amazon favors its own products in search results and “Buy Box” placements. But this practice mirrors what traditional retailers have done for decades with their private-label products. As many economists have noted, this behavior may actually benefit consumers through increased competition and lower prices. The FTC faces a steep challenge in demonstrating why Amazon’s version of this widespread retail practice suddenly warrants antitrust intervention.
Amazon will likely defend these practices as procompetitive innovations that improve the customer experience. They’ve previously argued that their policies ensure price competitiveness, reliable delivery, and quality assurance for consumers.
The FTC will need to show not just that these practices exist, but that they substantially harm competition beyond what would be expected from vigorous but fair competition. This requires connecting theoretical harms to actual marketplace evidence, something antitrust cases often struggle to achieve.
Ultimately, modern antitrust analysis weighs the potential anticompetitive effects against procompetitive benefits. The FTC will need to demonstrate that Amazon’s practices harm competition itself, not just individual competitors, and that this harm outweighs any consumer benefits. The FTC’s filing emphasizes that economists look at a firm’s conduct holistically when evaluating competitive impact:
Whether a firm uses several practices that each artificially restrain competition a little or uses a single practice that artificially restrains competition a lot makes no economic difference.
The FTC adds that “it matters whether the individual practices are anticompetitive rather than competition on the merits, but whether their negative effects on the competitive process are significant individually (rather than collectively) does not.”
Amazon’s filing, by contrast, places greater emphasis on the benefits of its business model. The company argues that “when assessing competition, economists will ask whether consumers have benefited, such as through improved prices, greater supply, or greater quality of goods regardless of whether individual competitors have failed or succeeded.” Amazon’s vast selection and consolidated shopping experience both reduce search costs for consumers. Amazon’s logistics network enables fast, reliable shipping that consumers value highly. Amazon’s systems actually drive price competition by rewarding sellers who offer the best deals.
Amazon’s filing also emphasizes its history of innovation, claiming economists should “consider whether Amazon has been successful through product innovation and differentiation.” The company argues that its “intense focus on establishing and maintaining customer trust by offering an improved shopping experience that brings long-term satisfaction to consumers” has improved retail competition broadly by causing “retailers to work to improve price, selection, customer service, return policies, and delivery times.”
The Two-Sided Platform Complication
As we explained in our post on market definition in the case, since the Supreme Court’s 2018 decision in Ohio v. American Express, courts have recognized that platform businesses serving multiple groups (like Amazon connecting buyers and sellers) require special economic analysis. Actions that appear anticompetitive on one side of the platform may benefit the platform as a whole.
For example, while Amazon’s fees might seem high for sellers, they fund services and features that attract buyers to the platform. More buyers, in turn, benefit sellers by increasing their potential customer base. This interdependence means courts must consider effects on both sides of the platform—a nuance that significantly complicates the FTC’s case.
The economics day hearing will likely feature significant discussion of how to properly apply the Amex framework to Amazon’s business. Key questions include whether different aspects of Amazon’s business constitute separate markets or a single integrated platform, and how to balance potential harms to sellers against benefits to consumers.
The Burden of Proof
A fundamental aspect of antitrust litigation that likely will not shape the March 7 “economics day” hearing, but is nonetheless worth keeping in mind, is the allocation of the burden of proof. As the plaintiff, the FTC bears the burden of proving each element of its case against Amazon. This isn’t merely a legal technicality but shapes how economic evidence must be presented and evaluated.
For monopolization claims under Section 2 of the Sherman Act, the FTC must prove both that Amazon possesses monopoly power and that it acquired or maintained that power through anticompetitive conduct—not simply through superior business acumen or historical accident.
Tomorrow’s hearing should provide a clearer picture of how both sides approach these complex issues and how the court might evaluate them. Like the market-definition dispute, the outcome will likely influence antitrust enforcement against digital platforms for years to come.
