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Potential FTC probe caps whirlwind week for Amazon

Another week, another whirlwind of news surrounding e-commerce’s resident superpower.

Capping a week of news about investigations, cutbacks and worse-than-expected earnings, The Wall Street Journal on Friday reported that Amazon (NASDAQ: AMZN) faces a potential antitrust lawsuit from the Federal Trade Commission in the coming months.

According to sources the Journal reported are familiar with the matter, the timing of the case is unclear and a suit may never be brought at all. The sources said Amazon officials have yet to meet individually with FTC investigators to argue against a legal challenge.

The subject of the potential suit, sources said, is the tech giant’s alleged anticompetitive practices, including a claim that it favors its own products over third-party sellers’ on its marketplace. The commission is also reportedly looking into Amazon’s practices around Prime subscription bundles.

The FTC is currently chaired by Lina Khan, whom Amazon petitioned to be recused in investigations of the company due to her past criticisms of its market power.

When FreightWaves asked for a statement about the potential suit, Amazon declined to comment.

Amazon isn’t the only tech giant feeling the heat from federal regulators. Cases brought by the FTC and Justice Department are currently pending against rivals Facebook and Google. But the massive marketplace also felt some pressure in other areas this week.

Regulators with the Occupational Safety and Health Administration (OSHA) on Thursday revealed it issued safety violations against Amazon warehouses in Aurora, Colorado, Nampa, Idaho, and Castleton, New York.

According to OSHA, workers in those facilities were exposed to a “high risk” of lower back injuries and other musculoskeletal disorders after spending hours lifting heavy items. The citations follow similar charges the agency made against three Amazon warehouses in January.

The company now has until Feb. 17 to address the most recent violations or face a $46,875 fine, which it told CBS MoneyWatch it plans to appeal.

More potential headwinds have popped up elsewhere within the company. On Wednesday, a report from Business Insider found Amazon has already halved its drone delivery teams in Lockeford, California, and College Station, Texas — the two locations where it launched its inaugural drone delivery services at the end of December.

The same day, another report from The Information revealed that after about a month of delivering in those states, the company’s drones had only reached a combined 10 households, an underwhelming figure considering the decade of promises it has made around the service.

And that’s not all. On Thursday, Amazon in its fiscal year 2022 earnings report posted a net loss of $2.7 billion, making last year the first since 2014 that the company was unprofitable. Experts and analysts credited much of the firm’s losses to its 20% stake in electric automaker Rivian, whose stock lost 82% of its value in ’22.

Watch: Amazon’s ups and downs in the drone industry

As a result, CEO Andy Jassy said on the company’s earnings call Thursday that it intends to shut down some Amazon Fresh supermarkets and Go convenience stores, with plans to halt expansion of its Fresh stores indefinitely. 

The brick-and-mortar locations are part of the company’s concerted push to gain market share in the grocery space, but The Information reported in December that several Fresh stores were sitting vacant. The company operates a few dozen Fresh locations and 28 Go stores in the U.S.

However, as always, there’s a silver lining for Amazon. Despite the chaos of this week, several experts believe the company may have launched a multibillion dollar business opportunity on Tuesday with the expansion of its Buy With Prime service.

The service — launched in April 2021 and initially limited to a handful of invite-only merchants — became widely accessible to other U.S. businesses Tuesday and could represent a major revenue driver for Amazon, according to analysts.

Buy With Prime allows merchants to offer Prime benefits to customers through their own e-commerce sites, including perks like seamless checkout and free and next-day delivery through Amazon’s fulfillment network.

In January, Amazon released research that showed merchants using Buy With Prime increased conversion rates by 25%, which makes sense given the added convenience sellers can add to their platforms.

Not only that, but the service removes complexity from merchants’ operations by outsourcing tasks like storage, packing, delivery, product returns and payment processing. That allows sellers to keep fixed costs low and focus on core operations like product and branding.

By and large, experts love Buy With Prime. Morgan Stanley analyst Brian Nowak projects it to be a $3.5 billion business by 2025, explaining that it could help the company utilize some of its excess logistics capacity.

There are some, though, who are less bullish, predicting it may take longer for the service to make an impact.

“At the end of the day, it’s not going to be meaningful for some time because this is such a small program,” Rick Watson, founder and CEO of RMW Commerce Consulting, told Retail Dive. “There’s something like a thousand sellers every day that joined the Amazon marketplace last year. How many are going to join with Buy with Prime every day this year? Not nearly that many.”

As the e-commerce giant gears up for 2023 and seeks to return to profitability, Buy With Prime could play a key role in its pursuit of new revenue streams.

Click for more FreightWaves articles by Jack Daleo.

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