The new Federal Trade Commission lawsuit claiming Amazon tricks consumers into enrolling in and renewing Prime seems weak. But, led by an outspoken Amazon critic, the FTC may have a more substantial action in the works.

“FTC Sues Amazon for Prime Enrolling Tactics” declared the lead headline in my print edition of today’s Wall Street Journal. That prominent position suggests the editors of the esteemed financial newspaper think this is a big deal.

I don’t — unless it’s just the opening volley in a much larger antitrust action against the No. 1 online retailer.

The lawsuit alleges that Inc. tricked consumers into signing up for Prime and then made it hard for them to cancel. The big problem with this charge is that there’s ample evidence consumers like the benefits they get from Prime, including free and fast shipping, streaming movies and TV shows on Prime Video, and other perks.

For example, a survey by Consumer Intelligence Research Partners found 94% of consumers who have subscribed to Prime for a year renew and that the two-year renewal rate was 98%.

Plus, it’s not hard to cancel Prime, at least not now. I tried today and it would have taken five clicks if I completed the process. The Wall Street Journal article does note, however, that Amazon made it easier for some subscribers to cancel in April, knowing the FTC lawsuit was coming.


Amazon, for its part, called the FTC action “false on the facts and the law” and complained that Amazon wasn’t given the usual opportunity to respond to the charges before the FTC filed the lawsuit.

The real antitrust case against Amazon

There is a real antitrust argument to make against Amazon, but it would be a tough case to win in today’s legal environment.

That case would argue that Amazon is engaged in predatory pricing by offering free and fast shipping at below cost, thus driving competitors out of business.

As evidence, trustbusters could point out that Amazon by its own accounts appears to be losing money in its retail operation. Contributing to the losses are the tens of billions of dollars Amazon has spent building out an extensive fulfillment network so that it can deliver online orders quickly to shoppers, and for free to Prime members and anyone who spends more than $25.


Amazon is only profitable, this argument goes, because of its hugely successful Amazon Web Services cloud computing unit. In 2022, Amazon reported AWS operating income of $22.8 billion and total operating income of only $12.2 billion. Part of that low total operating income stems from the e-retailer’s write-down of $12.7 billion in its shares of electric vehicle maker Rivian.

But, even excluding that Rivian write-off, AWS would have represented more than 90% of operating income. Add in the $37.7 billion Amazon reported in advertising revenue in 2022, most of which goes to the bottom line, and it’s easy to argue that the rest of Amazon’s operation —notably its retail activities  — lost money.

This is significant because Amazon’s free and fast shipping for Prime members puts pressure on rivals to match those offers. That no doubt contributes to the decline in the profitability of U.S. retailers over the last decade that has been documented by accounting and consulting firm Deloitte.

As Deloitte retail, wholesale and distribution leader Lupine Skelley put it in a recent interview with , “Free shipping can’t last. It’s getting to a breaking point.”


The problem for retailers competing against Amazon is that consumers love free shipping, so many online merchants feel they have to offer it. In fact, the forthcoming 2023 Top 1000 Report from will show that 77.2% of North America’s online leaders offered free shipping in at least some cases in 2022, up from 70.1% in 2019

The broader problem for most retailers is that they must turn a profit as retailers, while Amazon can lose money in retail and make so much money from AWS and advertising that it still generates the kind of healthy profit that makes it one of Wall Street’s darlings.

The obstacle to antitrust action against Amazon

None of this is news to FTC chairperson Lina Khan, who came to prominence in 2017 while still a law student at Yale for her article entitled “Amazon’s Antitrust Paradox.” That article argued for more aggressive action against Amazon and other technology giants that achieve dominant positions in their markets.

But in the article, Khan also explains what’s blocking such antitrust action. It is the prevailing view among federal judges, dating back to law professor and later judge Robert Bork’s 1978 book “The Antitrust Paradox” that argues antitrust litigation is only justified when a company’s actions harm consumers.


That point of view has been widely adopted by conservative judges, and it’s helped big companies fend off antitrust action. After all, Amazon, and for that matter Walmart Inc., can present plenty of evidence that they offer consumers low prices.

Those low prices — and, in Amazon’s case, free shipping offers — may drive competitors out of business. But in the Borkian view, antitrust law is not meant to protect business competitors, only consumers.

Opponents of that view argue that the market dominance of the likes of Amazon prevents the emergence of new, innovative companies that might offer even greater value to consumers. I know from my own reporting that venture capitalists frequently pose this question to aspiring online retail entrepreneurs: “If you’re successful, what’s to prevent Amazon from copying your business model?” Often, they have no answer, and don’t get the money to test out their ideas.

That brings me back to the reference I made above about this FTC lawsuit over Prime possibly being just the first in the agency’s planned actions against Amazon. The Wall Street Journal reported in February that the FTC was considering possible litigation against Amazon on a number of fronts, with the alleged Prime membership trickery being just one possible cause of action.


Perhaps, there will be a much more far-reaching FTC action in the future. Amazon’s rivals can dream of a successful lawsuit that would force Amazon to divest itself of AWS, which would force Amazon to actually try to make money as a retailer.

Don’t count on it. But anything short of that outcome, including whatever tweaks Amazon agrees to make in Prime membership signup and cancellation procedures, won’t undermine Amazon’s e-retail dominance or the costly pressure on rivals to offer margin-eroding free shipping offers.