Amazon and the Federal Trade Commission met in a Seattle court Friday to discuss the nuts and bolts of the sprawling antitrust lawsuit against the tech giant.

The hearing aimed to answer questions such as: How are the two parties defining monopoly power? Which markets does Amazon operate in? What evidence should the court consider?

Those details get at the central allegations against the e-commerce and tech company: Is Amazon a monopolist?

The hearing — typically known as “economics day” — was a way for each party to present what it sees as the crucial economic concepts a judge will need to consider when making a ruling. In this case, the two parties met in Seattle to brief U.S. District Judge John Chun. The next meeting will include the economists, hoping to illustrate the broad strokes attorneys laid out Friday.

The FTC and 19 states sued Amazon in 2023, alleging the e-commerce giant used unfair, anticompetitive strategies to illegally create a monopoly. Among the many allegations, the FTC accused Amazon of giving preference to its own brand over competitors, using an algorithm to crawl the internet and punish third-party sellers that offered lower prices elsewhere, and coercing sellers into using Amazon’s fulfillment services for a steep fee.

Amazon denies the FTC’s allegations, arguing that the agency is mischaracterizing its practices and is targeting some policies that actually benefit consumers by lowering prices and supporting third-party sellers.

The trial is set for October 2026. But, in the meantime, there’s a lot of ground to cover.

Here’s what the parties discussed at economics day.

Who are Amazon’s competitors?

One of the first steps in determining if a company is a monopoly is deciding what market, or markets, they compete in.

In this case, the FTC has outlined two markets where it alleges Amazon has monopolistic power: online superstores and online marketplace services.

The first, according to the FTC, is any business with a “broad and deep selection of products available online” that is competing to “build long-term relationships” with shoppers and become their “default shopping destination.”

The second applies to companies that are competing to provide third-party sellers with an online sales platform. The FTC focuses on platforms targeting U.S. consumers.

It’s still unclear who is in each of these categories. In its original complaint, the FTC said the online superstore market included Amazon and eBay, as well as the digital arms of Target and Walmart. At Friday’s hearing, FTC attorney Kenneth Merber suggested it’s possible Amazon might not be competing against anyone in those markets.

“Economists will look at what happens when a firm raises prices. What substitution do you see?” Merber said, referring to a substantial number of consumers taking their business elsewhere. “If the evidence supports the idea that Amazon raised prices, and saw very little substitution to anyone, that might suggest Amazon is the only firm in the market.”

Amazon argues the FTC’s definition is too narrow.

It competes with all sorts of retailers, from specialty stores to department stores, attorneys for the company said. And it doesn’t make sense to split online sales and brick-and-mortar sales for companies like Target and Walmart because both businesses offer shoppers a hybrid model, like ordering online and picking up in store, making the two parts of the business indispensable.

A “customer seeking to outfit a kitchen can readily buy the toaster from Amazon, the blender from Target.com and the microwave from a brick-and-mortar department store,” Amazon’s attorneys wrote in court documents, quoting a line from a Stanford Law & Policy Review article.

On the online marketplace services side, Amazon said it’s competing with companies like Walmart that offer a range of services to third-party sellers like Shopify that offer help reaching customers online and like UPS that offer fulfillment resources. (Judge Chun raised an eyebrow at the Postal Service being included in that category.)

What is the “cellophane fallacy”?

The FTC argued that, to some extent, the damage may already be done.

It invoked a legal term known as the “cellophane fallacy.” That principle asserts that if a company has already exercised its monopoly power, then consumers may have already switched to alternative products, making it hard to determine what the market should look like.

Merber compared it to the world of car sales. If one seller had monopolized the market and raised prices on cars, some consumers may have switched to motorcycles — even if they hadn’t considered purchasing a motorcycle before.

Amazon disagrees that the cellophane fallacy applies here but Merber said Friday it is something “that will have to be taken into account.”

The judge asked the FTC what to make of the millions of Amazon shoppers who say they are happy with the company. Are those consumers “like the proverbial frogs in the water that’s slowly getting warmer and warmer,” Chun asked. In other words, they’re not seeing incremental price increases? They’re not seeing incremental degradation in quality?

“What they’re doing is comparing it to alternatives that currently exist,” Merber said. “Customers essentially don’t know what they’re missing.”

What is Amazon’s argument?

Amazon argued in court records before Friday’s hearing that its conduct isn’t anticompetitive, it’s simply evidence that it is a good business.

“A vigorous competitive process naturally leads more efficient companies — those that provide consumers with what they want, at prices they like — to succeed where others may not,” Amazon wrote. “The antitrust laws do not prohibit such competition and such success. To the contrary, they encourage it.”

When looking at how to determine “monopoly power,” Amazon’s attorneys argued that monopolists don’t feel pressure to lower prices, enhance the quality of their products or invest in innovation. Amazon has done all of those things, its attorneys continued, so counting Amazon as a monopoly wouldn’t be “consistent” with that principle.

Turning to another prong of the definition, Amazon said the FTC would have to prove there are “substantial and durable” barriers to entry and expansion.

That’s not the case here either, Amazon said at the hearing and in court records, pointing to the entry and expansion of companies it considers rivals, including Walmart’s online store with third-party sellers and ultra-low-cost platforms Temu and Shein.

Lastly, it said the court should also consider the “procompetitive benefits” of its practices, or the ways consumers may have benefited from Amazon’s conduct, like lower prices or more selection.

Ultimately, economists working on this case “should be guided, above all else, by the foundational principle that the antitrust laws are to be invoked only if competition itself is harmed to the detriment of consumers,” Amazon wrote.

The FTC acknowledged that economists and the court would consider procompetitive benefits, as well, but said the next question would be to determine if those benefits could be achieved without the anticompetitive conduct and harm in the first place.

Why did Microsoft come up?

To illustrate Amazon’s closing point, attorney John Schmidtlein turned to the Seattle area’s other famed tech employer: Microsoft.

Microsoft lost an antitrust case in 2000 that accused the company of monopolizing the PC operating system market.

In one appeal, Microsoft argued it was not liable because the government could not show other companies would have sprung up in the market if not for Microsoft’s conduct, Schmidtlein said.

That’s not the case here, he continued. This antitrust case is alleging real harm to real competitions and real consumers. So, the FTC “needs to come forward with real anticompetitive effects.”

He was making a point that Amazon has brought up several times, accusing the FTC of relying on a few anecdotes from businesses that say Amazon crippled their chances of succeeding in e-commerce. The case should instead hinge on statistics and data, Amazon said.

In response, the FTC said it does see similarities between the Microsoft and Amazon cases.

Just as the FTC alleged Microsoft prevented rivals from gaining a foothold early on, the FTC here is “alleging that competition would look very different” if Amazon’s competitors had been able to kick-start their own e-commerce cycle.

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