California Is Suing Amazon Over Antitrust Violation

NEW YORK — California is suing Amazon, accusing the company of violating the state’s antitrust laws by stifling competition and engaging in practices that push sellers to maintain higher prices on products on other sites.

This lawsuit, totaling 84 pages, was filed in San Francisco Superior Court Wednesday. It mirrors a complaint that the District of Columbia filed earlier this year. The District of Columbia dismissed it. Now it is going through appeals.

But officials in California believe they won’t encounter a similar fate, partly due to information collected during a more than two-year investigation that involved subpoenas and interviews with sellers, Amazon’s competitors as well as current and former employees at the company.

In the lawsuit, California Attorney General Rob Bonta’s office said Amazon used contract provisions to effectively bar sellers from offering lower prices for products on non-Amazon sites, including on the sellers’ own websites. This, in turn harms other retailers’ ability to compete.

Merchants who don’t comply could see their products taken off Amazon’s top listings and subject to other penalties such as termination of their Amazon accounts or suspension. It alleges Amazon’s policy essentially forces merchants to list higher prices on other sites, helping the retail giant maintain its e-commerce dominance.

The California lawsuit is designed to prevent Amazon from entering into agreements with sellers that would harm price competition. The lawsuit also requests a court order to force Amazon to compensate the state for higher prices. The amount of money the state officials are asking for is not known.

The research firm Insider Intelligence estimates that Amazon has 38% of the U.S. online sales. That’s more than Walmart and Apple combined. About 2 million sellers list their products on Amazon’s third-party marketplace, accounting for 58% of the company’s retail sales.

“Amazon coerces merchants into agreements that keep prices artificially high, knowing full-well that they can’t afford to say no,” Bonta said in a statement.

Amazon previously stated that it was up to sellers to set their own prices. Amazon has stated that it is entitled to not highlight products priced lower than the market.

Despite that defense, Amazon’s market power has been a subject of scrutiny from lawmakers and advocacy groups calling for stricter antitrust regulations. Congressmen urged the Justice Department earlier this year to examine whether Amazon collects information on sellers in order to create competing products, and then make them prominently available on the site. Merchants are also more restricted by the increasing costs of selling, which critics claim makes it harder for them to get into the market.

Capitol Hill lawmakers have been pushing for bipartisan legislation to restrict Amazon and Big Tech companies like Meta, Google and Apple from favouring their products over those of competitors. Despite clearing key committees, the bill languished in Congress for several months due to intense opposition from companies.

Meanwhile, regulators have also been looking into Amazon’s business practices and deals. 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 U.S., the Federal Trade Commission is investigating Amazon’s $3.9 billion acquisition of the primary health organization One Medical as well as the sign-up and cancellation practices of Amazon Prime, the company’s paid subscription service that offers deals and faster shipping.

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