Washington, DC Attorney General Karl Racine announced Tuesday that he is suing Amazon for antitrust reasons, saying the company’s practices have unfairly raised prices for consumers and suppressed innovation.
Racine is seeking to end Amazon’s allegedly illegal use of price agreements to differentiate itself from the competition, recover damages, and impose penalties to deter similar conduct. The lawsuit asks the court to stop Amazon’s ability to harm competition through a variety of remedies as needed, which could include structural relief, often referred to as a form of disruption.
Amazon shares barely moved on the announcement, down 1% on Tuesday afternoon.
The lawsuit, filed in DC Superior Court, alleges the illegally maintained monopoly power of Amazon by using contractual provisions to prevent third-party sellers on its platform from offering their products at lower prices on other platforms. -forms. The attorney general’s office said the contracts create “an artificially high floor price in the online retail market,” according to a press release. The AG said these deals hurt both consumers and third-party sellers by reducing competition, innovation and choice.
Amazon requires third-party sellers who wish to do business in the online marketplace to honor its Business Solutions Agreement. Until 2019, Amazon included a clause in this document, called a “price parity clause”, which prohibited sellers from offering their products in a competitor’s online marketplace for a lower price than their products. sold on Amazon.
Amazon quietly removed this provision in March 2019 amid growing antitrust scrutiny.
According to the complaint, even after Amazon removed the price parity provision from its agreement with third-party sellers, it added an almost identical clause, called its “fair pricing policy.” The fair pricing policy allows Amazon to “impose penalties” on a seller who offers their product at a lower price in a competing online marketplace.
Amazon’s third-party marketplace of millions of merchants has become a critical part of Amazon’s e-commerce business. The market now accounts for more than half of Amazon’s overall sales.
“The DC Attorney General has it exactly the other way around – sellers set their own prices for the products they offer in our store,” an Amazon spokesperson said in a statement Tuesday. “Amazon takes pride in the fact that we offer low prices on the widest selection, and like any store, we reserve the right not to promote offers to customers whose prices are not competitive. The relief sought by the GA would force Amazon to offer higher prices to its customers, which would strangely defeat the fundamental objectives of the antitrust law. “
Amazon’s pricing deals have also come under scrutiny by the House Judiciary Subcommittee on the more than 400-page antitrust report, released last fall. Lawmakers have agreed that Amazon is using its dominance in e-commerce as leverage with third-party sellers to demand that they adhere to most-favored-nation clauses.
Racine said his lawsuit focuses on the so-called MFN deals because he sees them as “a clear policy that translates into higher prices for third-party sellers.”
“We know these clauses are disadvantaged in the law, especially when a company like Amazon has monopoly power,” Racine said. “And we know that in the past Amazon has been criticized for these types of clauses.”
The lawsuit comes months after federal and state authorities filed antitrust lawsuits against Google and Facebook.
Both of those lawsuits involved large coalitions of states banding together to file lawsuits, but Tuesday’s action only came from Racine’s office.
Racine said in a call with reporters Tuesday that the focal point of the trial, the contracts known as “most-favored-nation” agreements, was a topic he believed his office could tackle on its own. It is common for states to work together or with federal authorities on antitrust claims, especially those involving companies with sufficient resources, due to the amount of work required to bring such lawsuits. But Racine said the MFN issue was “low key enough” that his office could tackle it on its own.
Still, he did not rule out the possibility that other states or federal authorities were involved, saying it was common for others to join or file their own claims once a state sued. justice. But he did not indicate any knowledge of such plans.
This story is developing. Check back for updates.