Topline
California Attorney General Rob Bonta filed a lawsuit against Amazon on Wednesday, claiming the online retail giant inflated prices for consumers and stifled competition with other online retailers by forcing merchants into agreements that violate the state’s antitrust laws.
California is suing Amazon for allegedly violating state antitrust laws. (Photo by Smith … [+]
Key Facts
The lawsuit filed in San Francisco Superior Court alleges the company violated the state’s Unfair Competition Law and Cartwright Act by forcing merchants to enter agreements that “severely penalize” them for offering products at lower prices on other online retail sites.
Bonta argues those agreements, which force merchants to price their products as favorably on Amazon as on their own website or any other website, “thwart the ability of other online retailers to compete.”
He claims consumers face higher prices on other sites as a result because merchants know “full well they can’t afford to say no” to Amazon’s contracts.
Merchants that don’t agree to Amazon’s pricing terms risk having their products removed from Amazon’s site, as well as having their account suspended, the suit claims.
The lawsuit seeks a court order to prohibit Amazon from entering into anti-competitive contracts, appoint a court-approved monitor and return “ill-gotten gains” to other companies allegedly harmed by Amazon’s practices, although Bonta does not list a specific amount.
Key Background
The suit comes amid the company’s staggering growth, which skyrocketed during the pandemic, when brick-and-mortar retailers were forced to shutter. Amazon surged from a $920 billion company into a $1.49 trillion company in just the first few months of 2020. Nearly nine out of 10 shoppers in a recent Feedvisor survey said they are more likely to shop on Amazon than anywhere else, while 96% of Amazon Prime members said the same.
Tangent
The suit against Amazon is the latest antitrust action against a tech giant. The Federal Trade Commission has sued Facebook parent Meta over its acquisitions of Instagram and WhatsApp and its planned purchase of a virtual reality company, a slate of mergers the FTC argues is anticompetitive. Google has also faced state and federal antitrust suits, and the Department of Justice is reportedly preparing an lawsuit against Apple, claiming its App Store policies stifle competition. On Wednesday, a European Union court upheld a $4.13 billion fine against Google for violating antitrust laws by quashing competition on Android phones.
Contra
Previous attempts to combat alleged anticompetitive practices have had mixed results. In March, a federal judge dismissed a lawsuit filed in Washington D.C. that claimed Amazon’s pricing system harmed other online retailers, ruling there was not enough detail to substantiate the allegation, while another federal judge ruled a similar case in Washington could move forward as a class-action suit.
Crucial Quote
“For years, California customers have paid more for their online purchases because of Amazon’s anticompetitive contracting policies,” Bonta said in a statement Wednesday afternoon.
Sfurther Reading
California Sues Amazon for Alleged Antitrust Violations That Inflated Prices, Stifled Competition (Wall Street Journal)
California sues Amazon, alleging antitrust law violation (Associated Press)
California launches suit against Amazon alleging anticompetitive contracts with retailers (LA Times)
Source: https://www.forbes.com/sites/brianbushard/2022/09/14/california-sues-amazon-for-thwarting-competition-through-seller-contracts/