California is suing Amazon for allegedly banning sellers from offering lower prices on other sites.
On Wednesday, the state’s Attorney General Rob Bonta filed a lawsuit that alleges Amazon has stifled competition and forced consumers to pay more for goods through its pricing practices.
The lawsuit centers on how merchants selling on Amazon “must agree not to offer lower prices elsewhere — including competing sites like Walmart, Target, eBay, and, in some cases, even on their own websites,” the attorney general’s office claims.
If merchants break the pricing agreement, they risk losing visibility—or access to—the Amazon platform. “Amazon coerces merchants into agreements that keep prices artificially high, knowing full well that they can't afford to say no,” Bonta added in a statement. “With other e-commerce platforms unable to compete on price, consumers turn to Amazon as a one-stop shop for all their purchases. This perpetuates Amazon's market dominance.”
The practice can also cause prices for retail goods to “artificially stabilize at levels higher than would be the case in a competitive market,” Bonta’s office said. “This occurs not because Amazon competed successfully or because it is a more efficient retailer and marketplace, but because Amazon forbids it through coerced agreements."
However, Amazon says it's confident the court will dismiss Bonta's lawsuit, citing how a judge rejected a similar lawsuit from Washington D.C.'s Attorney General earlier this year.
"Sellers set their own prices for the products they offer in our store. 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 company said. "The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law. We hope that the California court will reach the same conclusion as the DC court and dismiss this lawsuit promptly."
In the past, the e-commerce giant has also justified the practice by saying it can “produce lower prices for customers overall.” If the company sees a merchant offering lower prices elsewhere, it argues the merchant is “trying to gouge Amazon customers and we don’t think that’s acceptable.”
However, California’s lawsuit claims Amazon is merely manipulating consumers into thinking they received the lowest price possible, “when in fact, they cannot get the low prices that would prevail in a freely competitive market.”
“Sellers report that because they ‘pay less in fees on our own and other websites, we could sell our products for lower prices on these websites,’ but ‘we do not do this” because “if we do, Amazon will disqualify [our] offers from the Buy Box,’” Bonta’s office added.
In suing Amazon, California’s Attorney General alleges the company broke the state’s main antitrust law. As evidence, the lawsuit cites internal Amazon documents, agreements concerning third-party merchants and wholesale suppliers, and witnesses.
The state’s lawsuit is demanding the Superior Court in California intervene and block Amazon from engaging in the pricing practices. Most notably, the lawsuit is also demanding the e-commerce giant pay damages to California consumers, who were forced to pay the allegedly inflated prices through Amazon.