California sued Amazon.com Inc., saying the company forces third-party merchants to agree to policies that lead to “artificially high prices” for consumers.
State Attorney General Rob Bonta on Wednesday announced the antitrust suit challenging Amazon merchant agreements that bar sellers from offering lower prices on other sites and impose stiff penalties if they do. He said the agreements block competition from other online retailers, resulting in inflated fees for merchants and higher prices for consumers.
“Amazon coerces merchants into agreements that keep prices artificially high, knowing full-well that they can’t afford to say no,” Bonta said in a statement. The suit, filed in state court in San Francisco, seeks an order blocking Amazon from continuing to engage in anticompetitive behavior and compensation for California consumers.
Amazon didn’t immediately respond to a request for comment.
The suit comes three years after Bloomberg reported that the company’s pricing policies were forcing sellers to raise their prices on competing sites like Walmart Inc. because if they offered lower prices on other sites Amazon would bury their products in search results.
Bonta’s suit similarly stressed that merchants risked less prominent placement on Amazon or even removal from the site if they charged less on rivals like Walmart, Target, eBay, and, in some instances, their own websites.
It’s not the first time that Amazon’s policy towards merchants has drawn scrutiny. The California suit is similar to one filed last year by Washington, D.C., Attorney General Karl Racine. A judge dismissed the suit last year, but Racine is trying to revive the case on appeal. The Justice Department submitted a brief in support of Racine’s appeal, saying the judge who dismissed it misapplied antitrust law.
In response to an antitrust price-fixing investigation by the Washington state attorney general, the company agreed to pay a $2.25 million fine in January and shutter a program in which it agreed on pricing with third-party sellers, rather than compete with them. Separately, a group of Amazon customers filed a proposed class-action lawsuit in federal court in Seattle in July, accusing Amazon of violating antitrust laws through agreements with sellers that guaranteed Amazon a minimum margin.
The Federal Trade Commission, which has both antitrust and consumer protection mandates, has also been investigating Amazon on several fronts. A probe into the e-commerce giant’s retail business, started in 2019 under the Trump administration, has since expanded under Chair Lina Khan into cloud computing services and M&A activity, such as its $8.45 billion acquisition of MGM Studios and its proposed deals for iRobot Corp. and One Medical.
‘Vicious anticompetitive cycle’
In August, the company accused the FTC of harassing founder Jeff Bezos and Chief Executive Officer Andy Jassy with “unduly burdensome” information requests.
Bonta highlighted Amazon’s market dominance in the California suit, calling the 160 million members of its Prime subscription service “the most lucrative customers online.” The state attorney general noted that half of Amazon’s third-party sellers derive more than 80% of their revenue from the site.
“For hundreds of thousands of third-party sellers, Amazon sales are effectively their entire business—lose Amazon, and they lose their livelihood,” Bonta said in the suit. As a result, the company was able to dictate terms, leading to “a vicious anticompetitive cycle in which Amazon wins and its third-party sellers, its wholesale suppliers, consumers, and competition lose.”
—With assistance fromSpencer SoperandMatt Day.
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FAQs
California Attorney General Rob Bonta had sued Seattle-based Amazon last September. He accused the retailer of threatening to cut off merchants or deny them access to its "Buy Box"--where shoppers can click "Add to Cart" or "Buy Now"--if they offered lower prices on rivals such as Costco (COST.
Is Amazon accused of illegally raising prices in antitrust lawsuit? ›
“The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them.
How did Amazon violate antitrust laws? ›
Last week, the Federal Trade Commission (FTC) and the attorneys general of 17 different states sued Amazon, alleging illegal "price spiking." The FTC claims that Amazon used a secret algorithm to manipulate rivals' weaker pricing algorithms and lock competitors into higher prices.
Did Amazon fail to dismiss California suit over inflated prices? ›
OAKLAND – California Attorney General Rob Bonta today secured a court ruling that blocked an attempt by Amazon to evade responsibility by denying Amazon's request that California's lawsuit against the company be dismissed.
What is the lawsuit against Amazon in California? ›
Background on Attorney General Bonta's Amazon Lawsuit:
The complaint alleges that Amazon violated California's Unfair Competition Law and Cartwright Act by requiring merchants to enter into agreements that severely penalize them if their products are offered for a lower price off-Amazon.
Is Amazon being sued for raising prices? ›
Feb 9 (Reuters) - Amazon.com (AMZN. O) , opens new tab was sued in a proposed U.S. class action accusing the online retailer of violating a consumer protection law by steering hundreds of millions of shoppers to higher-priced items in order to earn extra fees.
What is the Amazon lawsuit price gouging? ›
In a lawsuit, the Federal Trade Commission (FTC) said Amazon used a secret algorithm(opens in new window) to determine how much to raise prices in a way competitors would follow and that brought the company $1 billion in revenue.
Who are the 17 states suing Amazon? ›
The states involved in the case are Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin.
Why is the U.S. government suing Amazon? ›
The U.S. government files an antitrust lawsuit against Amazon In a monopoly lawsuit, the Federal Trade Commission and 17 states accuse Amazon of suffocating rivals and raising costs for both sellers and shoppers.
Does Amazon do predatory pricing? ›
If you're an Amazon seller, you've likely encountered an increase in competition in recent years. With increased competition comes an increase in predatory pricing and price undercutting.
It's also a test of whether even the federal government has the power, and the political will, to rein in corporate monopoly power.
Why are Amazon prices so inflated? ›
Amazon binds its sellers over to something called Most Favored Nation status. That means that sellers can't offer their goods more cheaply than they do on Amazon — even if it costs them (lots) less to sell in Target or direct from their websites.
How has Amazon broken the law? ›
In September, the U.S. Federal Trade Commission (FTC) and 17 U.S. states filed a lawsuit denouncing the company's abuse of its dominant position. The 172-page complaint alleges that Amazon has engaged in conduct that kept prices high and quality low, limiting fair competition and stifling innovation.
Why are Prime members suing Amazon? ›
The lawsuit claims subscribers already paid for the ad-free version and it is unfair for the company to charge consumers for a service in which they have already paid. To support the claim, the lawsuit also notes Amazon advertised the subscription as a service that included ad-free streaming of movies and TV.
What is Amazon being accused of? ›
Amazon sued by FTC and 17 states over allegations it inflates online prices and overcharges sellers. U.S. regulators and 17 states are suing Amazon over allegations the e-commerce behemoth abuses its position in the marketplace to inflate prices on and off its platform, overcharge sellers and stifle competition.
What has Amazon been accused of? ›
Amazon.com has been criticized on many issues, including anti-competitive business practices, its treatment of workers, offering counterfeit or plagiarized products, objectionable content of its books, tax and subsidy deals with governments.
What was Amazon accused of? ›
The Federal Trade Commission is accusing Amazon founder Jeff Bezos and other top company executives of using disappearing messaging apps such as Signal to conceal potential evidence in the agency's ongoing antitrust case against the e-commerce behemoth.
What did Amazon get accused of? ›
The FTC accused Amazon of creating a secret “Project Nessie” pricing algorithm that may have generated more than $1 billion in extra profits.)
Why is Amazon accused of being a monopoly? ›
“Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” John Newman, deputy director of the FTC's Bureau of Competition, said in a press release.
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