Amazon is being sued by the state of California for allegedly breaking the state’s antitrust and unfair competition laws by restricting competition and compelling vendors to keep higher pricing on their products on other sites.
In the lawsuit, which was filed on Wednesday in San Francisco Superior Court, California Attorney General Rob Bonta asserts that Amazon uses contract provisions to effectively prevent third-party sellers and wholesale suppliers from offering lower prices on non-Amazon sites, including their own websites. According to the complaint, this damages the ability of other retailers to compete.
“Without basic price competition, without multiple web sites competing to offer the lowest prices, prices artificially stabilize at levels higher than they would be in a competitive market,” according to the complaint.
According to the lawsuit, merchants that do not adhere to Amazon’s pricing guideline could have their products removed from prominent Amazon listings and face other consequences, such as account suspensions or terminations. The lawsuit seeks an injunction prohibiting Amazon from engaging into contracts with sellers that impair price competition, as well as a court order compelling Amazon to compensate the state for price increases. State officials did not disclose the amount of money they are requesting.
The 84-page lawsuit is identical to one brought by the District of Columbia last year, which was dismissed by a district judge earlier this year and is currently being appealed.
However, California officials believe they will avoid a similar fate, thanks in part to material gathered during a more than two-year probe that included subpoenas and interviews with vendors, Amazon’s competitors, and current and former Amazon workers.
“Suppressing competition”
Inside Intelligence reports that Amazon controls over 38% of online sales in the United States, more than Walmart, eBay, Apple, Best Buy, and Target combined. A report from congressional Democrats projected Amazon’s share to be about fifty percent. 58% of Amazon’s retail sales come from its third-party marketplace, where about 2 million vendors offer their products.
During a news conference on Wednesday, Bonta stated that some sellers have stated they would offer cheaper pricing on other sites with lower seller fees, but refrain from doing so in order to avoid penalties from Amazon.
“Amazon has suppressed its rivals for years by limiting price competition, not by competing well,” Bonta added. Families in California paid more as a result, and now Amazon must pay the price.
According to him, the case also serves as a warning to other businesses that “illegally manipulate the market to the detriment of California consumers, small business owners, and the economy.”
The Associated Press did not immediately receive a response from Amazon to a request for comment. In the past, the firm has stated that merchants establish their own rates on the marketplace. It has also stated that it has the right to avoid highlighting products with uncompetitive prices.
In spite of this claim, Amazon’s market dominance has been scrutinized by legislators and advocacy groups seeking stronger antitrust rules. Earlier this year, members of Congress urged the Justice Department to investigate whether the firm collects information on vendors in order to build competing products and promote them on its website. Critics have also criticized Amazon’s growing seller fees, which make it more difficult for new merchants to enter the market.
Bipartisan legislation has been proposed on Capitol Hill to prevent Amazon and other Big Tech companies, including Apple, Meta, and Google, from preferring their own products and services over competitors. The law has passed through important committees, but it has lingered in Congress for months due to fierce opposition from the firms.
Meanwhile, regulators have investigated Amazon’s corporate operations and transactions. In July, the company offered concessions to settle two antitrust investigations in the European Union, including a promise to apply equal treatment to all sellers when ranking product offers on the site’s “buy box,” a coveted spot that makes items more visible to shoppers.
In the United States, the Federal Trade Commission is examining Amazon’s $3.9 billion acquisition of the primary health organization One Medical as well as the sign-up and cancellation procedures of Amazon Prime, a paid subscription service that offers savings and speedier shipping for a monthly fee.