Is Amazon Illegally Raising Prices? DC Attorney General Sues Tech Giant Over Allegations
Washington, D.C., Attorney General Karl Racine sued Amazon on Tuesday for alleged anticompetitive practices that he said made consumers worse off and hindered innovation.
“Amazon has used its dominant position in the online retail market to win at all costs,” Racine said in a Tuesday news release announcing the lawsuit. “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.
“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.”
Amazon engaged in online retail price-fixing through contract provisions and policies the tech giant “previously and currently” required third-party sellers on the platform to agree to, according to the Office of the Attorney General.
According to the lawsuit, filed in D.C. Superior Court, Amazon fixed prices through what the Attorney General’s Office described as “most favored nation” agreements, which prohibit thirty-party sellers from selling products they sell on Amazon.com at lower prices on other online platforms.
The agreements also allegedly restrict the sellers from offering lower prices on their own websites for products they also sell on Amazon.com.
“These agreements effectively require third-party sellers to incorporate the high fees charged by Amazon — as much as 40% of the total product price — not only into the price charged to customers on Amazon’s platform, but also on any other online retail platform,” the Attorney General’s Office said.
“As a result, these agreements impose an artificially high price floor across the online retail marketplace and allow Amazon to build and maintain monopoly power in violation of the District of Columbia’s Antitrust Act.”
For years, Amazon has controlled online retail prices through its restrictive contract provisions & policies. Amazon requires third-party sellers to agree that they won’t offer their products anywhere else online – including their own websites – for a lower price than on Amazon.
— AG Karl A. Racine (@AGKarlRacine) May 25, 2021
Amazon’s “far-reaching” activities negatively affect customers and third-party sellers, Racine said. They “suppress competition, choice, and innovation,” according to the attorney general.
“OAG is seeking to put an end to Amazon’s control over online retail pricing, as well as damages, penalties, and attorney’s fees,” Racine’s office said.
The tech giant disputed that in a statement Tuesday.
“The DC Attorney General has it exactly backwards — sellers set their own prices for the products they offer in our store,” an Amazon representative told The Verge.
“Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively.”
“The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law,” the company representative said.
Robert Kaminski, an analyst at the research firm Capital Alpha Partners, told The Wall Street Journal that Racine was facing an uphill battle.
“If there was an obvious antitrust problem for Amazon, that lawsuit would have been filed a long time ago,” Kaminski said.
“The fundamental problem for antitrust hawks is that Amazon’s third-party seller platform benefits consumers,” he said.
Democratic Sen. Richard Blumenthal of Connecticut released a statement in favor of Racine’s lawsuit, according to the outlet, saying he regretted that “federal regulators failed to act sooner.”
According to Herb Hovenkamp, an antitrust law professor at the University of Pennsylvania Law School, the scope and impact of Racine’s lawsuit is and will be limited.
“It’s not nearly as direct as a federal case,” Hovenkamp told The Washington Post. “In this case, we’ve got one party suing in one state court, so if they win, it’s going to cover DC and that’s pretty much it.”
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