For Amazon’s Andy Jassy, a Cleanup Job Just Got a Lot Bigger

For Amazon’s Andy Jassy, a Cleanup Job Just Got a Lot Bigger

The F.T.C. accused the internet giant of protecting an online retail monopoly and forcing higher prices onto consumers.

In the two years since Andy Jassy replaced Jeff Bezos as Amazon’s chief executive, he has been cleaning up after his company’s aggressive pandemic expansion and after Mr. Bezos. Mr. Jassy has reined in Amazon’s voracious warehouse growth, culled from the company’s sprawl of products and laid off thousands of employees on several of Mr. Bezos’ pet projects.

On Tuesday, he was handed another challenge: a long-anticipated lawsuit from the Federal Trade Commission. The government claimed Amazon used unfair tactics to monopolize online shopping in a way that raises prices and hurts quality for consumers. The suit focused on parts of the business that took off before Mr. Jassy gained control over the retail division.

The redacted complaint mentions Mr. Bezos 16 times, and Mr. Jassy only twice.

Mr. Jassy joins other big tech chief executives who have taken control of enormous businesses from idiosyncratic founders at difficult moments. As with those other second-generation bosses, Mr. Jassy’s success will not only depend on whether he is a visionary like the man who started the company. It could also be shaped by how well he navigates the fears of Wall Street investors and the distrust of regulators in Washington.

“He is cleaning up a mess that somebody else created,” said Sucharita Kodali, an analyst at Forrester Research. “And he is doing it while trying to keep the ship afloat.”

Bill Gates passed Microsoft to Steve Ballmer as the company was dealing with its long and bruising antitrust fight with the Justice Department. At the same time, online advertising and software sold over the internet were driving a new generation of young rivals like Google.

At Google’s parent company Alphabet, Larry Page tapped Sundar Pichai to run the company as it was dealing with a restive work force upset by a variety of issues, including sexual harassment and a contract with the Defense Department. Its business practices were also facing more scrutiny by regulators around the globe. A year after the handoff, the Justice Department sued Google for antitrust violations, culminating in a trial that began this month.

At Google’s parent company Alphabet, Sundar Pichai was tapped to run the company as it was dealing with work force issues.Jason Henry for The New York Times

Now Mr. Jassy has his own fight with regulators while Mr. Bezos’ post-Amazon life is obsessively documented by the paparazzi in what Extra TV called a “seemingly endless summer vacation.”

Mr. Jassy has said he talks to Mr. Bezos, who is engaged in the company as executive chair of the board, about once a week.

Amazon declined to comment on Mr. Jassy. But the company said the F.T.C.’s case was without merit and would harm customers by creating higher prices, slower deliveries and reduced options for small businesses.

Mr. Jassy started at Amazon in 1997, three days after taking his last exam at Harvard Business School. He worked on Amazon’s music business, which at the time meant selling CDs. Amazon was still just a retailer. Mr. Jassy went on to found Amazon Web Services, which became the leading provider of cloud computing services and an important profit driver for Amazon, and he gained a spot on the company’s leadership team. His customers were not consumers. They were businesses and other enterprises that needed technology services.

The F.T.C.’s lawsuit does not touch any of the services offered by A.W.S. Instead, it focuses on the businesses built by other executives who oversaw the core of Amazon’s retail business, several of whom have left the company in recent years.

The legal battle with regulators seemed inevitable. By the time Mr. Bezos named Mr. Jassy as his successor, the F.T.C. investigation had already begun. Mr. Jassy summoned a group of company executives for a briefing on the antitrust fight, The New York Times previously reported. In his first year, he began making the rounds in Washington, meeting with senators, the secretary of commerce and White House officials, presenting himself as a grounded, diplomatic spokesman for the company.

“He has done a lot, but he clearly is going to have a lot more to do,” said Tom Forte, an analyst at the investment bank D.A. Davidson who has covered the company for more than two decades.

Overseeing the antitrust case is a team under the company’s general counsel, David Zapolsky, who joined Amazon in 1999, just two years after Mr. Jassy. His key deputies include Andrew DeVore, who has represented the company before Congress, and Bryson Bachman, who joined Amazon four years ago after leaving the Justice Department’s antitrust division.

When Mr. Jassy took over in July 2021, the pandemic had supercharged the company’s growth. But that growth soon hit a wall.

Wall Street had long given Mr. Bezos a pass, tolerating periods of little to no profit as the company pursued new ventures — from costly studio productions and a massive organization to build the Alexa voice assistant to drone deliveries and a hunt to build successful grocery stores — but the share price fell swiftly.

“It was definitely going to be a harder act for Jassy,” Ms. Kodali said.

Though Mr. Jassy has said “the team made the right decision” to spend aggressively in the pandemic, he slammed the brakes on the company’s warehouse expansion, paused work on the largest phase of Amazon’s planned second headquarters in Northern Virginia, and laid off 27,000 corporate and tech employees.

He ended or pared back some of the company’s bets that had yet to truly pay off, laying off employees from teams working on the Alexa voice assistant, drones and automated stores.

The company has 1.46 million employees, down from its peak of 1.62 million early last year.

The changes have begun producing results. Amazon’s growth has picked up steam, and profits expanded more than Wall Street expected. In the latest quarter, sales grew 11 percent to $134.4 billion, and profit rose to $6.7 billion, up from a small loss a year earlier.

In many ways, Mr. Jassy’s success has come from making Amazon more dependent on the parts of the business that the F.T.C. is targeting: the services, like advertising and fulfillment, that it offers to sellers on its marketplace.

In the past year, sales of products Amazon sells online directly to customers were up just 4 percent, but the services it provides sellers to reach customers, including shipping and referral fees, grew 18 percent. Advertising was up 22 percent.

Analysts say its services are more profitable than selling products directly to customers, echoing the high-margin service business Mr. Jassy built in cloud computing.

Products offered by marketplace sellers, not Amazon directly, accounted for 60 percent of its retail sales in the latest quarter.

On a call with Wall Street analysts in August, Mr. Jassy spent 15 minutes laying out his vision. In previous calls, he spoke much about the work he did retrenching and focusing on what seemed like the problems he inherited.

This was, Mr. Forte wrote in a note to investors, “the clearest and most overt description of his vision for the future.” He talked about having big ambitions in artificial intelligence, health care and success in restructuring the logistics to make more products available faster than ever.

Less than two months later, the FTC filed suit, setting up a long and contentious fight ahead.

Steve Lohr contributed reporting.