California Attorney General Sues Amazon for Blocking Price Competition

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California Attorney General Rob Bonta today filed a lawsuit against Amazon, saying that the business utilized anticompetitive contracting tactics to hinder competition and raise prices throughout the state, in violation of California’s Unfair Competition Law and Cartwright Act. Amazon encourages merchants to engage into agreements that severely punish them if their items are provided at a cheaper price off-Amazon in order to prevent competing on price with other online e-commerce sites. Attorney General Bonta claims in today’s case that these arrangements make it difficult for other online retailers to compete, leading to Amazon’s dominance in the online retail business and affecting merchants and customers via inflated fees and increased prices.

“For years, California customers have paid more for online purchases due to Amazon’s anticompetitive contracting practices,” Attorney General Bonta stated. “Amazon coerces retailers into agreements that artificially keep prices high, knowing full well that they can’t afford to say no.” Consumers resort to Amazon as a one-stop shop for all their purchases since other e-commerce platforms are unable to compete on pricing. This maintains Amazon’s market dominance, enabling the business to impose more unreasonable expectations on its merchants while costing California customers more at the checkout. The truth is that many of the things we purchase online would be cheaper if market forces were unrestricted. We’re fighting back with today’s lawsuit. We will not let Amazon manipulate the market at the cost of California consumers, small business owners, and a fair and competitive economy.”

With over 160 million Prime members worldwide and almost 25 million consumers in California alone, Amazon is the leading online retail shop in the United States. According to one poll, 96% of all Prime members claimed they are more inclined than any other online retailer to purchase things from Amazon, and 74% of all customers go straight to Amazon when they are ready to buy a certain product.

As a result, Amazon has become a must-have distribution channel for retailers. Indeed, despite the fact that the overall cost of selling on Amazon much surpasses that of selling in other online shops, an increasing number of third-party merchants join Amazon every day. “We have nowhere else to go,” one merchant said, “and Amazon knows it.”

According to the lawsuit, which cites interviews with sellers, competitors, and industry consultants conducted over several years, Amazon frequently removes “Buy Now” and “Add to Cart” buttons from product listings if it notices the same products listed cheaper at a competitor site, such as Walmart or Target. Because such buttons are a major source of sales, third-party merchants are driven to boost their pricing on other marketplaces rather than risk losing sales on Amazon, according to the complaint.

The attorney general is seeking a court order prohibiting Amazon from continuing the alleged conduct, as well as monetary penalties.

California accounts for a very tiny fraction of Amazon’s 76.6-million-strong customer base; the state is home to an estimated 25 million consumers. However, as The New York Times points out, if it is successful, it might have a far-reaching influence throughout the nation. According to the research company Insider Intelligence, Amazon controls around 38% of online sales in the United States, more than eBay, Walmart, Best Buy, Apple, and Target combined.

Other legal actions taken against Amazon’s contractual provisions have had little effect. A case identical to California’s launched by Karl Racine, the District of Columbia’s attorney general, was dismissed this spring when a court said it lacked sufficient proof that Amazon’s rules were anticompetitive. (Racine wants to file an appeal.)

“Like the D.C. attorney general, whose lawsuit was rejected by the courts, the California attorney general gets it completely wrong,” Alex Haurek, an Amazon spokesperson, said in response to the claims. “Sellers choose their own pricing for the items they sell in our shop.”

However, other investigations are underway, including one led by Federal Trade Commission chairperson Lina Khan, which tries to identify instances of antitrust breaches by Amazon as well as whether the company’s Amazon Prime membership canceling procedure is purposefully complicated. Overseas, Amazon has long faced antitrust scrutiny from the European Commission, the executive branch of the European Union, which has claimed that the company boxes out competitors, develops first-party products using proprietary third-party seller data, and pressures merchants to use its logistics services.

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