Amazon, the e-commerce giant, has revolutionized the e-commerce experience, transforming how we acquire products in the digital age since 1994. However, due to the lack of mobility resulting from the pandemic, the company founded by Jeff Bezos sparked a shift in consumer habits. It seized the demand for online shopping by expanding its global network of industrial facilities and significantly reducing shipping times through logistical strategies in its Amazon Prime subscription service. The delivery times were reduced from two days to one day starting in 2019.

Over the past four years, Amazon's expansion has been more evident than ever. Between 2019 and 2022, the company's net income increased by a remarkable 69%, soaring from $280.5 billion to $514 billion, as reported in the company's financial statements. During the same period, Amazon's property portfolio, including office spaces, physical stores, industrial warehouses, and data centers, practically doubled, reaching over 61.4 million square meters distributed worldwide.

According to SiiLA, in strategic Latin American countries such as Brazil, Colombia, and Mexico, the gross leasable area (GLA) of offices and industrial warehouses occupied by Amazon increased by up to 32 times between December 2019 and September 2023, depending on the case. In Mexico, the company currently occupies approximately 590,000 square meters, while in Brazil, it occupies around 560,000 square meters, and in Colombia, its facilities exceed 10,500 square meters.

However, despite the years of e-commerce boom worldwide and Amazon positioning itself as a company that innovates to enhance the customer experience, the U.S. government has been investigating the company for alleged anti-competitive behavior.

In late September 2023, the Federal Trade Commission (FTC) and attorneys general from 17 U.S. states filed a historic antitrust lawsuit against Amazon. In their complaint, U.S. authorities accused the e-commerce giant of "illegally" obstructing new competitors or the growth of existing ones with "coercive and punitive" tactics.

The U.S. government alleges that Amazon engages in various monopolistic activities, primarily by stifling price competition, restricting product access, imposing high fees on sellers, curbing innovation in the retail sector, and preventing current or future rivals from accessing a critical mass of buyers and sellers.

Amazon's Monopoly, as Per the U.S. Government

To fully understand the rationale behind this lawsuit, it's important to note that most of the products sold on Amazon are not directly sold by the company but by third-party sellers who use the platform as a point of sale. Furthermore, Amazon's platform features various brightly colored buttons and attractive formats, such as the "Buy Now" button, which encourages buyers to make purchases, as well as a subscription service called "Prime," offering improved purchasing and shipping conditions to Amazon customers.

Although these aspects are common in any online retail setting, the issue, according to the U.S. government, is that Amazon leverages its size and infrastructure to "strangle" competition.

How does it do this? The FTC argues two points. Firstly, when a customer clicks "Buy Now," Amazon tracks other websites and, if it finds the same product at a lower price, penalizes the seller by removing buttons like "Buy Now" and "Add to Cart" to reduce their sales. This forces them to raise their prices on competing websites or lower their prices on Amazon. Additionally, in these cases, the company is accused of adding a button to "View All Buying Options," redirecting customers to similar products from other sellers that do not offer lower prices elsewhere on the internet than those on Amazon. According to the FTC, this circumstance prevents other websites from offering discounts and gives Amazon nearly absolute control over prices in the market.

Secondly, the "Prime" service, offering fast shipping, is used by Amazon to compel sellers to use the company's logistical infrastructure. In this regard, U.S. authorities argue that sellers must pay Amazon and utilize its warehouses and shipping systems to qualify as "Prime" products, limiting their options and increasing their reliance on Amazon.

In response to these accusations, Amazon has argued that these tactics benefit customers by fostering competitive prices and swift deliveries through a global supply chain, ensuring lower production costs and greater product exposure.

The case of the U.S. government against Amazon remains open. The resolution of the lawsuit could significantly impact the company's future and, more broadly, on how we shop online. If authorities succeed in proving allegations of anti-competitive practices, this could lead to substantial changes in how Amazon operates and affect competition in the e-commerce market. On the other hand, if Amazon successfully defends its practices as beneficial to consumers, it may continue operating similarly.

Regardless of the outcome, Amazon's case before U.S. authorities is a prominent example of how the growth and influence of major tech companies can raise questions about competition and regulation in the digital economy.

SiiLA will continue to monitor the development of e-commerce and its impact on the commercial real estate market. For more information on this and other topics, visit SiiLA REsource or contact us at contacto@siila.com.mx.