The state of California yesterday filed a lawsuit against Amazon on antitrust grounds, charging that the online retailer stifles competition by penalizing sellers for offering products elsewhere for lower prices.
“For years, California consumers have paid more for their online purchases because of Amazon’s anticompetitive contracting practices,” state Attorney General Rob Bonta (D) said in a statement.
From the Washington Post coverage:
"California’s suit alleges that Amazon’s actions have harmed the state’s consumers and economy. The complaint alleges that Amazon has previously misled other regulators who have scrutinized its effect on pricing.
"'Amazon makes consumers think they are getting the lowest prices possible, when in fact, they cannot get the low prices that would prevail in a freely competitive market because Amazon has coerced and induced its third-party sellers and wholesale suppliers to enter into anticompetitive agreements on price,' the suit alleges.
"The suit refers to contracts that Amazon signs with third-party merchants who sell items on its site. These agreements, the suit says, forbid sellers from listing items for less money on competitor sites such as Walmart, Target or even on their own websites.
"'Amazon has misled consumers into believing they are getting the low prices that would prevail in a competitive market when, in fact, it has deliberately caused prices to be generally higher everywhere else than they would be absent price parity,' the complaint alleges."
The New York Times writes that "the lawsuit largely focuses on the way Amazon penalizes sellers for listing products at lower prices on other websites. If Amazon spots a product listed cheaper on a competitor’s website, it often will remove important buttons like 'Buy Now' and 'Add to Cart' from a product listing page.
"Those buttons are a major driver of sales for companies selling through Amazon, and losing them can quickly hurt their businesses.
"That creates a dilemma for marketplace sellers. At times, they can offer products for lower prices on sites other than Amazon because the cost of using those sites can be lower. But because Amazon is by far the largest online retailer, the sellers would rather raise their prices on other sites than risk losing their sales on Amazon, the complaint said, citing interviews with sellers, competitors and industry consultants."
The Post story notes that "Amazon’s third-party seller business is a significant source of money for the company — earning it $27.4 billion in revenue in the last quarter alone. Third-party sellers have long accounted for more than half of all items sold on Amazon."
Amazon's response is that the California attorney general “has it exactly backwards” and that “sellers set their own prices/"
The Post writes that Amazon spokesman Alex Haurek said that "Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively … The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law."
The lawsuit is being filed as legislators and regulators - in states, the federal government, and abroad - all are paying more attention to Amazon's policies.
The Post writes that "some of these efforts have faced roadblocks in the courts, including a very similar lawsuit brought by D.C. Attorney General Karl A. Racine (D) last year. That suit was thrown out by a judge this year, but Racine in August filed a notice that he would appeal the decision.
"The California suit could foreshadow antitrust challenges against Amazon in Washington. The Federal Trade Commission has been investigating the company for years, and its chair, Lina Khan, is widely expected to take action against the company, following years of criticizing its allegedly monopolistic practices as an academic and congressional staffer."
- KC's View:
I have no idea of the legalities, but it does strike me that this is a conversation/debate that needs to take place, and in a public forum. Amazon wields enormous market power, and I understand why it wants to preserve its preeminent position in shoppers' minds. But punishing vendors who - for reasons that may be related to Amazon's policies - may be able to sell their products cheaper elsewhere does seem to be problematic.
Amazon likes to characterize this as persecution, but to me, it all is inevitable. It is the price of accumulating all that power, all that wealth, all that ubiquity.