Sep 14, 2022 - Technology

Calif. AG accuses Amazon of blocking price competition in new lawsuit

Illustration of a gavel handle made from the Amazon logo
Illustration: Annelise Capossela/Axios

California Attorney General Rob Bonta is accusing Amazon of boosting prices for consumers through its contracts with platform sellers in a new antitrust lawsuit Wednesday.

Why it matters: The lawsuit claims Amazon's contracts with its sellers lead to inflated prices for goods online and hamper the ability of other online retailers to compete with the e-commerce juggernaut.

Driving the news: The lawsuit, filed in a state Superior Court in San Francisco, alleges Amazon requires its third-party sellers to enter into agreements that penalize them if they offer their products for a lower price on another website.

  • Merchants lose the chance to have their products sold through the "Buy Box" add-to-cart button on Amazon or must "compensate" Amazon if other online stores sell their goods for lower prices, according to the AG's office.
  • Vendors told the AG's office they could sell their products for lower prices on other websites, including their own, because they pay less in fees. But they don't do so out of fear of losing the "Buy Box."
  • The lawsuit accuses Amazon of violating the California’s Cartwright Act and the California Unfair Competition Law.

What they're saying: Amazon's policies "effectively set a price floor" for online goods, Bonta said in a press conference announcing the lawsuit.

  • "In this economic climate, we need to do all we can to ensure the market is fair, that it is competitive, so consumers are not forced to pay artificially inflated prices," Bonta said.

Flashback: Washington D.C. Attorney General Karl Racine sued Amazon in 2021 over the contracts with third-party sellers.

  • Amazon successfully argued for the D.C. Superior Court to dismiss the lawsuit earlier this year, but Racine indicated he would appeal the ruling.
  • Bonta noted his lawsuit comes before a California court and accuses Amazon of violating California law, and said his case is more detailed than others.
  • "We wouldn't bring this case unless we were confident in its likelihood of success on the merits," Bonta said.

The other side: Amazon eliminated the requirement that sellers not offer their products at lower prices on other sites in 2019.

  • But both the California and the D.C. lawsuits claim Amazon's agreements still give it the power to penalize sellers that offer their products for lower prices elsewhere.
  • "Sellers set their own prices for the products they offer in our store. 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," a spokesperson from Amazon said in a statement.
  • "The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law. We hope that the California court will reach the same conclusion as the D.C. court and dismiss this lawsuit promptly."

What's next: The California lawsuit seeks damages, prohibiting Amazon from entering into anticompetitive contracts and a requirement that Amazon notify its sellers that they do not have to offer prices on par with prices on other sites.

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