On Friday, the FTC is expected to present to the court its economic arguments in its antitrust case against Amazon. Central to any antitrust proceeding is defining what market the alleged monopoly dominates. In the case of the Amazon lawsuit, the FTC has failed to define a realistic market that the retailer supposedly dominates.

Market Definition is the Foundation of Any Antitrust Case

At its core, any antitrust case depends on accurately defining the market. Without a clear and realistic understanding of the competitive landscape, it is impossible to assess whether a firm is engaging in anti-competitive behavior. As Geoffrey A. Manne explains, “market definition is a critical component of any antitrust case.”

Therefore, without accurate market definitions, any allegation relating to competition in business is fundamentally flawed. Gregory J. Werden, retired Senior Economic Counsel in the U.S. Department of Justice’s Antitrust Division, further clarifies this point:

—”Alleging the relevant market in an antitrust case does not merely identify the portion of the economy most directly affected by the challenged conduct; it identifies the competitive process alleged to be harmed.”

Since the FTC’s market definitions are flawed, its case against Amazon lacks a solid foundation. The agency’s outdated and overly narrow view of retail ignores the realities of modern commerce, where competition is broad, cross-channel, and constantly evolving. By failing to account for the true nature of today’s retail environment, the FTC’s argument falls apart under scrutiny.

The FTC’s Market Definition Ignores Modern Retail Competition for Consumers

The FTC claims that online stores operate in a distinct market from “brick-and-mortar” stores. This rigid distinction does not reflect the actual way retailers and consumers behave.

Retail today is “omnichannel“, meaning that most major retailers operate both online and in physical locations. Companies of all sizes—ranging from large chains like Walmart and Target to smaller independent businesses—have embraced a blended approach, allowing consumers to shop seamlessly across multiple platforms. Customers can browse and purchase products online, pick them up in-store, or buy directly from physical locations. These options create a fluid retail environment where online and offline markets are deeply interconnected.

Ignoring this reality leads to misleading conclusions about competition. According to research by Analysis Group, 84% of Amazon Prime subscribers also subscribe to a brick-and-mortar membership with another retailer, demonstrating that consumers do not see these as separate markets. Instead, they make purchasing decisions based on price, convenience, and availability, rather than an artificial divide between digital and physical stores. As Geoffrey A. Manne, President of the International Center for Law & Economics, points out:

—“There are countless examples where consumers cross-shop online and offline—televisions and other electronics, clothing, and sporting goods (among many others) spring to mind. Indeed, most consumers would surely be hard-pressed to identify any product they’ve purchased from Amazon that they have not, at some point, also purchased from an offline or non-superstore retailer.”

Moreover, the FTC’s case excludes key online competitors like Temu, which competes aggressively with Amazon for both sellers and consumers. The FTC’s decision to disregard companies like Temu—along with other retail brands with both online and brick-and-mortar presences—results in a narrow, misleading definition of the market that does not reflect the realities of the dynamic retail space.

As a result, the FTC ignores a crucial fact: retail is a fiercely competitive space. Companies like Walmart and Target are rapidly expanding their online market offerings, with Walmart seeing a fivefold increase in e-commerce sales from 2017 to 2023. There has also been a rise in direct-to-consumer offerings, with sales growing from $76.57 billion in 2019 to $212.9 billion in 2024, a 178% increase. This is because it is increasingly easy for brands to set up their own store websites. All of this points to competition in retail growing, rather than the opposite.

Moreover, despite the growth of e-commerce, it still represents only a fraction of retail sales. It accounted for only about 16.4% of total U.S. retail sales in the fourth quarter of 2024. The vast majority of shopping still occurs in traditional stores or through hybrid models that blend online browsing with physical purchasing. Consumers regularly compare prices and shop across channels—whether they are buying electronics, clothing, or household goods.

The FTC’s Market Definitions Mischaracterize the Competitive Landscape for Sellers

In its case against Amazon, the FTC attempts to separate online marketplaces from other sales channels, including online retailers that purchase inventory directly (such as Walmart or Target), sellers’ own branded websites powered by SaaS solutions, and social media-driven sales platforms. However, these channels directly compete with online marketplaces for sellers. If an online marketplace were to raise fees or degrade its services, sellers could—and frequently do—shift to alternative channels. This kind of substitution clearly demonstrates that vendors and SaaS-powered storefronts act as competitive constraints on online marketplaces.

The FTC’s market definition also overlooks the increasing role of e-commerce aggregators and social commerce platforms. Likewise, Snapchat’s shopping features allow brands to market directly to consumers, with checkout and fulfillment supported by third-party logistics providers. In 2024, a study by National Research Group showcased the unique advantages a platform like Snapchat has, labelling it as the top platform for “social shopping”. With millions of millions users engaging with Snapchat’s shopping features each month, social commerce is a formidable force in online retail.

Furthermore, the FTC argues that SaaS platforms are not in the same market as online marketplaces because they do not provide immediate access to a built-in customer base. This is inconsistent with the FTC’s own claims about Amazon’s alleged degradation of its marketplace through increased reliance on paid advertising. If sellers on Amazon must now invest in marketing and promotion to stand out, how is that functionally different from marketing a digital store? The FTC’s attempt to distinguish these business models ignores the competitive pressure they exert on each other.

Ultimately, the complaint’s narrow market definition does not align with the way sellers actually operate in e-commerce. Sellers have a variety of ways to reach consumers, from selling as vendors to major retailers, to using SaaS platforms, to leveraging social commerce and aggregator-driven discovery. By excluding these alternatives, the FTC fails to capture the true competitive dynamics of online retail.