District of Columbia alleges Amazon broke antitrust laws by insisting third-party sellers not offer better deals on other platforms
Amazon on Tuesday has been hit with an antitrust lawsuit filed by the Attorney General of the District of Columbia (Washington DC).
Attorney General Karl Racine announced he is suing Amazon on antitrust grounds, claiming the company’s practices have “raised prices for consumers and stifled innovation and choice across the entire online retail market.”
Furthermore, the lawsuit also alleges that Amazon illegally maintained monopoly power through pricing contracts with third-party sellers. The complaint was filed in the District of Columbia Superior Court.
The Washington DC AG made clear that he believes Amazon has used its power in an allegedly anticompetitive manner.
“The Office of the Attorney General (OAG) alleges that Amazon fixed online retail prices through contract provisions and policies it previously and currently applies to third-party sellers on its platform,” said the announcement.
“These provisions and policies, known as “most favoured nation” (MFN) agreements, prevent third-party sellers that offer products on Amazon.com from offering their products at lower prices or on better terms on any other online platform, including their own websites,” the statement says.
The OAG says these agreements effectively require third-party sellers to incorporate the high fees charged by Amazon – as much as 40 percent of the total product price – not only into the price charged to customers on Amazon’s platform, but also on any other online retail platform.
“As a result, these agreements impose an artificially high price floor across the online retail marketplace and allow Amazon to build and maintain monopoly power in violation of the District of Columbia’s Antitrust Act,” the OAG said.
“The effects of these agreements continue to be far-reaching as they harm consumers and third-party sellers, and suppress competition, choice, and innovation. OAG is seeking to put an end to Amazon’s control over online retail pricing, as well as damages, penalties, and attorney’s fees.”
“Amazon has used its dominant position in the online retail market to win at all costs,” said AG Racine. “It maximizes its profits at the expense of third-party sellers and consumers, while harming competition, stifling innovation, and illegally tilting the playing field in its favor.”
“We filed this antitrust lawsuit to put an end to Amazon’s illegal control of prices across the online retail market,” said AG Racine. “We need a fair online marketplace that expands options available to District residents and promotes competition, innovation, and choice.”
The OAG pointed out that Amazon is the world’s largest online retailer, controlling 50-70 percent of the online market sales.
It also has over two million independent third-party sellers rely on Amazon Marketplace.
The OAG alleges that in 2019, Amazon claimed to have removed its price parity policy that explicitly prohibited third-party sellers from offering their products on a competing online retail sales platform, including the third-party sellers’ own website, at a lower price or on better terms than offered the products on Amazon.
“But in fact, Amazon quickly and quietly replaced the price parity policy with an effectively-identical substitute, its Fair Pricing Policy,” said the OAG. “Under the Fair Pricing Policy, third-party sellers can be sanctioned or removed from Amazon altogether if they offer their products for lower prices or under better terms on a competing online platform.”
Got it backwards
Amazon was quick to respond to the antitrust lawsuit from District of Columbia, with an Amazon spokesperson reportedly saying that Racine “has it exactly backwards.”
“Sellers set their own prices for the products they offer in our store,” CNN reported Amazon as saying. “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.”
Amazon reportedly said Racine’s proposed remedy would “force Amazon to feature higher prices to customers.”
Other is also facing similar action on this side of the pond.
Last week tougher new laws in Germany were used to begin an antitrust investigation of Amazon over alleged market domination.
And in November 2020, the European Commission hit Amazon with its “Statement of Objections”, which it said concerns “the use of non-public independent seller data”.
It alleged that Amazon had used data on third-party sellers that use its marketplace to boost sales of its own-label goods.