D.C. Anti-Trust Lawsuit Vs. Amazon Alleges Sellers and Consumers Penalized by Policy via Monopoly on Pricing
The District of Columbia is suing Amazon, Inc. in an antitrust lawsuit, claiming the behemoth company punishes sellers on its marketplace from offering lower prices on other sites, thus creating higher prices for consumers.
Amazon, the largest online retailer globally, has dominated online sales and currently controls between fifty to seventy percent of global sales through its "Amazon Marketplace."
The Office of the Attorney General (OAG) alleges Amazon fixed pricing by sellers via their contract stipulations, including the policy that they cannot sell their products for anything lower than the Amazon prices. Called "most favored nation" agreements, Amazon controls the sellers by requiring all third-party sellers to sell only at the Amazon pricing or higher, even on their company websites. Currently, over two million independent sellers are working on Amazon to sell their products.
D.C. Attorney General Karl Racine said these Amazon sellers' contracts are illegal since they contractually create anti-competitive practices that hurt consumers.
"Amazon has used its dominant position in the online retail market to win at all costs. 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," said Racine. "We filed this antitrust lawsuit to put an end to Amazon's illegal control of prices across the online retail market. We need a fair online marketplace that expands options available to District residents and promotes competition, innovation, and choice."
Third-party Amazon sellers pay as high as forty percent fees, which they add to their sales price to work with the global online retail giant. Due to the contracts, the sellers also must keep that extra forty percent built into their pricing with Amazon on all other consumer sales online, thus raising the price for consumers.
The offices of the District of Columbia Attorney General allege these inflated prices across all online sites allow Amazon not only to create but also maintain a monopoly, which is a violation of the D.C. Antitrust Act. The lawsuit claims the contracts harm consumer's choices, suppress competition, and also hurt innovation.
In an interview reported by the Wall Street Journal, Racine said, "Amazon wins because it controls pricing across the online retail-sales market, putting itself at an advantage over everyone else. These restrictions allow Amazon to build and maintain monopoly power."
Court documents state, "Amazon suppressed competition from other online retail sales platforms, such as eBay, Walmart, and even the TPSs' own websites. This restraint also artificially raised the price of goods to consumers across the online retail sales market, because TPSs were forced to incorporate Amazon's high fees and costs into their product prices not only when selling on Amazon, but also when selling across the entire online retail sales market by virtue of the PPP."
The lawsuit includes information about Amazon's competitors, such as Walmart and other online marketplaces, and how their pricing contracts impact fair pricing for all.
In court documents, the offices of the D.C. AG state, "Amazon horizontally competes with other online retail sales platforms, like Walmart and eBay, in the online retail marketplace. Amazon also horizontally competes with many of its TPSs because: (1) Amazon and many of its TPSs compete against each other through their respective online retail sales platforms; and (2) Amazon sells its own products in direct competition with many TPSs' products in the online retail sales market. By restraining TPSs' ability to offer lower prices and better terms on their own or other online retail sales platforms—and thereby restraining other online retail sales platforms' ability to compete for those sales by offering TPSs lower fees or better terms on which to offer their products— Amazon has engaged in horizontal agreements in restraint of trade, in violation of D.C. Code § 28-4502, resulting in supra-competitive prices in the online retail sales market."
The lawsuit says the offices of the D.C. AG seek to "end Amazon's use of illegal price agreements to foreclose competition and maintain its monopoly in online retail sales. Additionally, the lawsuit seeks to recover damages and impose penalties to deter similar conduct by Amazon and other companies."
