The newest FTC lawsuit is here. In the last few years, the Federal Trade Commission (FTC) has targeted many tech companies over their alleged monopolistic practices in the US. After Google (Alphabet) and Facebook (Meta), the FTC’s latest victim is Amazon.
The FTC aims to protect American consumers from unfair and deceptive business practices. Going to court against trillion-dollar multinational companies isn’t a walk in the park and can take years if not decades. When the news is announced, the immediate reaction to the stock price is negative. Ultimately, the real consequences can only be felt when the final decision is taken.
If the FTC wins all its lawsuits, Facebook, Google, and Amazon’s stocks might take a big hit and welcome new competition. In Europe, big tech is having similar issues with local authorities. They are asked to change their practices or face the consequences. Look at Amazon’s recent lawsuit and how Facebook and Google are faring with theirs.
On September 26th, 2023, an FTC lawsuit was filed against Amazon with 17 other states. They allege that the e-commerce and tech multinationals use anticompetitive and unfair monopolistic strategies.
How does this affect its consumers? According to the multi-year legal investigation, prices are higher than expected, quality is bad, innovation isn’t incited, and competitors are prevented from growing.
What did Amazon respond? Their practices are in line with consumer protection. If the lawsuit is successful, Amazon claims that prices and delivery times will increase, and there will be fewer opportunities for businesses and fewer choices for consumers. The immediate result was a 4% loss on the stock market. What are the long-term consequences for Amazon?
Long-Term Consequences
Hundreds of thousands of businesses and consumers rely on Amazon for their shopping. We don’t know what happens behind the scenes. All we see are Prime deals, sales, and featured ads. We don’t know if the product we are offering is the best one for us.
The FTC claims Amazon pushes its products before its competitors. If sellers want to remain in business, they can’t go on other platforms. Rival e-commerce companies can also not expand their platforms because of acquisitions and unfair practices by Amazon.
If the FTC lawsuit is successful, Amazon, sellers, and consumers will all be impacted. Amazon might have to break into smaller companies, and new sellers will emerge. According to the FTC, it will level the playing field, benefiting all consumers and sellers. It’s hard to predict what will happen. Consumers will find it more difficult to find what they need if sellers are scattered around dozens of platforms. We want convenience and efficiency because our time is precious today.
How Strong Is the FTC's Case Against Amazon?
If the FTC lawsuit succeeds, the government will have much more power to dictate big tech‘s actions and business. In Amazon’s case, they are changing how the company profits and deals with its customers would be wiser.
Amazon should promote the best products instead of their own and focus on consumer experience instead of profits. Increasing marketplace competition might hurt both sellers and consumers. However, Amazon is a public company whose shareholders come before its customers.
The battle between the FTC and Amazon has huge consequences, but I doubt they will be settled in the next few months. Both sides have a case. The recent lawsuit shouldn’t impact the stock until further developments occur.
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FTC Lawsuit vs Facebook (Meta)
In 2020, the FTC and 48 other states sued Facebook, targeting its alleged monopoly in the social network market. The case was initially dismissed, but after further review, it was allowed to proceed in January 2022 with some changes.
The entire FTC lawsuit relies on Facebook’s acquisitions of WhatsApp, Instagram, and other companies. The FTC argues it buried its competitors and created a monopolistic environment. According to its allegations, the FTC claims that since 2016, more than 60% of active daily social media users have turned to Facebook.
FTC’s Case Against Facebook
This case is very different from Amazon’s. The FTC claims that Facebook’s ads and privacy mismanagement hurt its users. We have little control over which ads we see and how our privacy is used for (or against?) us.
It’s difficult to force consumers to use one social media platform over another. We follow what is trendy and not what is practical in this case. If everyone is on Instagram, we’ll be there too. In this case, TikTok, Twitter (X), and several other platforms exist. However, the FTC lawsuit can protect users and force Facebook to change its practices for the best.
In recent years, the stock has seen several ups and downs due to the lawsuit, allocation of funds, and its Meta transition. Facebook’s business still has a long way to go, and several positive and negative catalysts are sure to appear in the next quarters.
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FTC Lawsuit vs Google (Alphabet)
In 2020, the FTC and eight other states filed a similar lawsuit against Google regarding the company’s monopolistic practices in digital advertising.
According to the FTC lawsuit, Google has been misbehaving for the last 15 years by acquiring competitors, forcing the adoption of Google’s tools, and impeding the rise of its competitors’ ad technologies.
Is Google too greedy and not allowing new players in the digital advertising business? Probably. Is it the first time it’s been sued for illegal practices? No!
FTC’s Case Against Google
Google had many settlements in the past, with settlements regarding YouTube and Apple’s Safari. Few people use other browsers or video streaming websites because Chrome and YouTube are the best.
However, this may be due to Google buying all the competitors and limiting the resources to new market entrants. This time, the FTC might have a case with its digital advertising practices.
Did you know that 80% of Alphabet’s revenues come from digital advertising on Google? If the FTC lawsuit succeeds, this number might decrease, but it will take years.
FTC vs Future Tech Companies
The FTC is also suing Microsoft over its acquisition of videogame creator Activision Blizzard and Meta’s acquisition of VR startup Within. They cite the same grounds of monopolistic practices and threats to innovation in the industry.
Who else does the FTC have its eyes on? Is Apple on their radar, too? Big tech is already having issues in Europe because their laws are stricter. In the US, FTC chair Lina Khan is loading and attempting to take them down individually with an FTC lawsuit.
Final Thoughts
Lina Khan and the FTC are out for big tech blood. For now, lawsuits against Facebook, Amazon, Google, and Microsoft are still pending. Apple is safe from an FTC lawsuit for the moment.
It might take years for the cases to come to an end. Until then, they will have little to no effect on the stock market. However, revenues will decrease if they ever come to fruition, and these companies have to share their market cap with competitors. As consumers and their business clients, we may feel negative or positive effects.
After all, the FTC is suing big tech, saying their revenues are too high and they steal from retailers and clients. Will it be better or worse once their monopolistic tendencies end? Only time will tell. Until then, big tech remains a solid investment with plenty of growth around the corner.
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