Amazon Policy Leads to Higher Consumer Prices, D.C. Suit Alleges
WASHINGTON— Amazon.com Inc. AMZN 0.43% was hit Tuesday with an antitrust suit by the District of Columbia, which alleges that the company blocks sellers on its marketplace from offering better deals elsewhere, leading to higher prices for consumers.
The lawsuit targets contracts between Amazon and its sellers, which D.C. Attorney General Karl Racine said prevent the sellers from offering lower prices on any other website, including their own.
“Amazon wins because it controls pricing across the online retail-sales market, putting itself at an advantage over everyone else,” Mr. Racine said on a call with reporters. “These restrictions allow Amazon to build and maintain monopoly power.”
Amazon disputed the allegations, saying that sellers on its site set their own prices.
“Like any store we reserve the right not to highlight offers to customers that are not priced competitively,” Amazon said. “The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”
The lawsuit cites violations of Washington, D.C., law rather than federal law, which could limit the case’s ultimate impact. In other recent antitrust lawsuits against Facebook Inc. and Alphabet Inc.’s Google, Mr. Racine joined multiple states to bring their complaints before a federal court.
“If there was an obvious antitrust problem for Amazon, that lawsuit would have been filed a long time ago,” said Robert Kaminski, an analyst with research firm Capital Alpha Partners. “The fundamental problem for antitrust hawks is that Amazon’s third-party seller platform benefits consumers.”
Sen. Richard Blumenthal (D., Conn.) issued a statement supporting the suit and adding that he regretted “federal regulators failed to act sooner.”
Alex Petros, policy counsel at advocacy group Public Knowledge, which favors more regulation of large tech platforms, said the lawsuit has merit.
“Consumers are paying more than they should for what they buy online as a direct result of Amazon’s conduct,” he said.
Mr. Racine said states could join Tuesday’s action, but so far Washington, D.C., has conducted its own investigation. “We saw this…issue as an important issue that was sufficiently discrete that we, our office, could conduct the investigation and bring the suit on our own,” he said.
The lawsuit, filed in Washington, D.C., Superior Court, centers on agreements between Amazon and third-party sellers on the Amazon marketplace, which Mr. Racine said accounts for more than half of all online retail sales.
The agreements lead to higher prices for consumers, Mr. Racine said, because Amazon levies fees as high as 40% of the product price, and Amazon sellers can’t offer lower prices on other websites.
Until 2019, Amazon explicitly prohibited U.S. sellers from offering their products at a lower price or better terms elsewhere online, the lawsuit says. Amazon removed that policy but replaced it with a new “Fair Pricing Policy” that was an “effectively identical substitute,” the lawsuit says.
Mr. Racine said he hopes the lawsuit will help put an end to such agreements.
The Fair Pricing Policy allows sellers to set their own prices, according to Amazon. The company also monitors prices elsewhere on the web. If a seller offers a product on Amazon for a higher price than listed elsewhere, Amazon may not feature that seller’s offer. The company may send the seller a warning to that effect.
Amazon has said the policy is designed to protect consumers from being overcharged, as well as to give sellers information so that their offers can be featured. The company says it decides which offers to feature based on price, delivery speed and other factors.
Mr. Racine said the policy ends up hurting consumers because it leads sellers to choose not to offer lower prices on websites not named Amazon, even when the sellers may want to do so.
For example, a seller might want to offer a product on Walmart Inc.’s WMT 0.41% website at a lower price than on Amazon if Walmart took a lower cut of each sale.
“Walmart routinely fields requests from merchants to raise prices on Walmart’s online retail sales platform because the merchants worry that a lower price on Walmart will jeopardize their status on Amazon,” the lawsuit alleges.
Walmart didn’t immediately respond to a request for comment.
The suit also claims that sellers are inclined to bend to Amazon’s wishes, because so many consumers shop there. “Fear of Amazon may even cause sellers to remove listings from other online market platforms entirely,” the lawsuit says, adding that a lack of competition between Amazon and other sites harms innovation.
Amazon has said its fees for sellers are competitive and cover services provided to them.
The Federal Trade Commission and other U.S. states have also been probing some of Amazon’s business practices. In November 2020, the European Union accused the company of violating antitrust laws by unfairly competing against third-party sellers.
Mr. Racine is under consideration to be nominated by President Biden to chair the FTC, according to people familiar with the matter. Asked about that possibility Tuesday, he said: “The FTC matter is up to the president. I’m not talking about that.”
A Democrat who took office in 2015, Mr. Racine has joined members of both parties in criticizing what he views as outsize power wielded by large technology companies.
In September 2019, he stood in front of the Supreme Court with Republican attorneys general, including Texas’ Ken Paxton, to announce a joint probe of Google. The attorneys general later sued Google separately, with Mr. Paxton and other Republicans targeting Google’s ad-technology business and a separate bipartisan group including Mr. Racine alleging Google illegally maintains a monopoly over online search.
In December 2018, Mr. Racine filed another solo suit against a tech company. He was the first attorney general to sue Facebook for alleged privacy violations related to the Cambridge Analytica political consultancy’s use of consumer data. That case also cited violations of Washington, D.C., laws. It is ongoing.
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—John D. McKinnon contributed to this article.
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Published at Tue, 25 May 2021 22:11:00 +0000