California’s Attorney General filed a lawsuit in Superior Court in San Francisco against Amazon on September 14 alleging it stifled competition and caused increased prices through “anticompetitive contracting practices.”
The timing of the filing coincided with the first day of the 2-day Amazon seller conference in Seattle, possibly a deliberate choice knowing sellers were likely to discuss the litigation amongst themselves and with Amazon executives during the in-person event.
In Wednesday’s press release, the Attorney General wrote in part:
“In order to avoid competing on prices with other online e-commerce sites, Amazon requires merchants to enter into agreements that severely penalize them if their products are offered for a lower price off-Amazon.
“In today’s lawsuit, Attorney General Bonta alleges that these agreements thwart the ability of other online retailers to compete, contributing to Amazon’s dominance in the online retail marketplace and harming merchants and consumers through inflated fees and higher prices.”
The AG claims Amazon has used its market power to raise its fees to sellers, but prohibits them from offering lower prices on lower-fee platforms (which has been referred to as a price parity clause), explaining in part:
“One e-commerce consultant reported that Walmart, eBay, and other sites “charge much lower fees” than Amazon. “Because the cost to sell on these other websites is lower, my clients would like to offer lower prices on them.” However, “my clients do not offer lower prices on those websites because doing so would result in the suppression of the Buy Box for their Amazon listing.””
Amazon issued a statement on Wednesday in response in which it said the Attorney General “fundamentally misunderstands the retail industry and misconstrues Amazon’s practices,” and claimed it “aims to provide our customers with the best possible shopping experience, including low prices.”
With regard to price parity, Amazon offered the following defense:
“Sellers in Amazon’s store set their own prices for the products they offer. Amazon makes no effort to prevent them from offering lower prices elsewhere. But Amazon knows customers expect to find low, competitive prices in the Amazon store. Amazon, like any store, reserves the right not to highlight prices that are uncompetitive compared to other major retailers. When sellers set prices that are uncompetitive compared to these retailers, those offerings are still available to customers in Amazon’s store, but Amazon does not highlight them.”
Furthermore, Amazon said highlighting higher prices than what is available elsewhere “would damage our customers’ trust in Amazon’s store and hurt the predominantly small and medium sized businesses who sell” on its platform.
In its lawsuit, the AG is asking the Court for the following relief:
- Prohibit Amazon from entering into and enforcing its anticompetitive contracts that harm price competition;
- Require Amazon to affirmatively notify vendors that it does not require sellers to offer prices on par with off-Amazon prices;
- Appoint a Court-approved monitor, to ensure Amazon’s compliance with the Court’s order;
- Order damages to compensate for the harms to consumers through increased prices; and
- Order Amazon to return its ill-gotten gains and pay penalties to serve as a deterrent to other companies contemplating similar actions.
A copy of the complaint is available here – the redactions are sure to pique readers’ curiosity.