California is suing Seattle-based Amazon, saying that the company broke the state’s antitrust and unfair competition laws by stifling competition and doing things that make sellers on other sites keep their prices high.
Rob Bonta, the attorney general of California, says that Amazon uses contract provisions to stop third-party sellers and wholesale suppliers from lowering prices for products on non-Amazon sites, even on their own sites.
The complaint says that this makes it harder for other stores to compete.
California filed the 84-page lawsuit in San Francisco Superior Court on Wednesday.
It is similar to a complaint that the District of Columbia filed last year, which was thrown out by a district judge earlier this year and is now being appealed.
But officials in California say they don’t think they will have the same problem.
This is because they have information from a more than two-year investigation that included subpoenas and interviews with sellers, Amazon’s competitors, and current and former Amazon employees.
“Without basic price competition, without different online sites trying to outdo each other with lower prices, prices artificially stabilize at levels higher than would be the case in a competitive market,” the complaint states.
The suit says that merchants who don’t follow the policy could have their products taken off of Amazon’s most prominent listings and face other penalties, like having their accounts suspended or closed.
It says that Amazon’s policy forces merchants to list higher prices on other sites, which helps Amazon keep its lead in online shopping.
The lawsuit from California wants, among other things, to stop Amazon from making contracts with sellers that hurt price competition.
It also wants a court to order Amazon to pay the state money for the higher prices. The state didn’t say how much money they want.
The Associated Press asked Amazon for a comment, but they didn’t answer immediately.
The company has previously said that sellers on the platform set their own prices. It has also said that it has the right to avoid putting products in the spotlight if their prices are not competitive. In a Wednesday statement,
Amazon reviewed these points again and said that Bonta has it “completely wrong.”
Insider Intelligence, a research company, says that Seattle-based Amazon controls about 38% of online sales in the U.S.
This is more than Walmart, eBay, Apple, Best Buy, and Target combined.
Democrats in Congress put Amazon’s share at about 50% in a report. On Amazon’s external market, almost 2 million suppliers advertise their goods. 58% of the business’s retail sales come from these sales.
During a news conference on Wednesday, Bonta claimed that several sellers have stated they would provide lower prices on other websites with lower seller fees, but they don’t because they don’t want to upset Amazon.
“Amazon has stifled its competition for years, not by successfully competing, but by blocking competition on price,” Bonta said. “As a result, California families paid more, and now Amazon must pay the price.”
He said the lawsuit is also a message to other companies who “illegally bend the market at the expense of California consumers, small business owners, and the economy.”
Those in the tech sector also criticized the case. Amazon would be forced to boost pricing, according to Adam Kovacevich, CEO of the industry trade group Chamber of Progress, which receives funding from Amazon and other internet businesses.
“That makes no sense while consumers shop for bargains to counter inflation, and it’s based on a legally unsound theory already rejected by federal courts,” Kovacevich said.
Even with that defense, lawmakers and advocacy groups that want stricter antitrust rules have been looking at Amazon’s market power.
Earlier this year, members of Congress asked the Justice Department to look into whether or not the company collects information on sellers to make competing products and feature them more on its site.
Critics have also said that the rising fees sellers pay make it harder for new merchants to join the market.
On Capitol Hill, congressional lawmakers from both parties have been pushing for legislation that would make it harder for Amazon and other big tech companies like Apple, Google, and Meta to prioritize their goods and services over those of their competitors.
The bill has passed through the most important committees, but it has been stuck in Congress for months because of strong opposition from the companies.
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References:
https://www.cbsnews.com/news/california-sues-amazon-antitrust-law-violations/
