D.C. attorney general sues Amazon for price fixing
Karl Racine, the attorney general of Washington, D.C., has filed a lawsuit against Amazon.com in federal court charging the retail and technology giant with exercising monopoly power by blocking third-parties selling on its marketplace from offering lower prices or better terms when selling the same items on other sites, including their own.
So-called “most favored nation” (MFN) agreements, Mr. Racine claims, effectively result in marketplace sellers having to incorporate higher fees charged by Amazon, which may represent as much as 40 percent of a product’s selling price, on other platforms operated by Walmart, eBay and others. The result is that artificially high prices are established, causing harm to both the sellers and consumers, while limiting choice and competition.
The suit filed in D.C.’s Superior Court Civil Division points to Walmart as a point of comparison to make its case.
“Walmart charges no setup, subscription, or listing fees, only a referral fee on each sale,” the complaint reads. “TPSs (third-party sellers) who choose to use Walmart’s Fulfillment Services program are charged a fixed monthly storage and fulfillment/delivery fees that are significantly less than what Amazon charges. Walmart sellers are not forced into a $39.99 monthly subscription.”
The fact that so few marketplace sellers abandon Amazon for alternative options is evidence of its monopolistic power, according to the suit.
“We filed this antitrust lawsuit to put an end to Amazon’s illegal control of prices across the online retail market,” said Mr. Racine in a press release. “We need a fair online marketplace that expands options available to District residents and promotes competition, innovation, and choice.”
The D.C. attorney general said that Amazon claimed in 2019 that it had ended its “price parity policy” but that, in reality, it had simply replaced what went before with an “effectively-identical substitute” known as its “Fair Pricing Policy.” The current program still results in the same penalties for sellers found to offer better deals elsewhere. Amazon subjects violators to sanctions or removes them from its online marketplace altogether.
Amazon claims that marketplace sellers alone are responsible for setting prices on their products.
“Like any store we reserve the right not to highlight offers to customers that are not priced competitively,” Amazon said, according to The Wall Street Journal. “The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”
- AG Racine Files Antitrust Lawsuit Against Amazon to End its Illegal Control of Prices Across Online Retail Market – Office of the Attorney General for the District of Columbia
- District of Columbia v. Amazon.com, Inc. – Superior Court of the District of Columbia Civil Division
- Amazon Policy Punishes Consumers, D.C. Suit Claims – The Wall Street Journal
DISCUSSION QUESTIONS: Do you see Amazon’s “Fair Pricing Policy” as being anticompetitive? Do you know of other similar agreements in force at other large retailers, whether online or in physical store environments?