Why should it be illegal? Its their platform. If enough sellers don't like it and leave then Amazon will have to change their policy. There's several other platforms people can sell their stuff on.
Because its a collective action problem. Being on Amazon is the least bad option for any individual business even though they would all be better off if they left simultaneously. IMO a primary purpose of market regulation should be to counteract these types of problems so that the market can move itself out of a local maxima and become more efficient overall.
Because it's monopolistic and hinders other competitors from entering the marketplace which harms consumers in the longterm.