Amazon is Getting Sued for Blocking Price Competition

The state of California is suing Amazon for allegedly forcing its third-party sellers into unfair pricing agreements, stifling competition and raising prices statewide. California Attorney General Rob Bonta filed a lawsuit Wednesday in San Francisco Superior Court, alleging the e-commerce giant stifled competition and drove up prices across California through anti-competitive contracting practices. – tactics that would violate California unfair competition law and the Cartwright Act.

It’s Amazon’s contractual language with third-party sellers that’s at the center of the lawsuit, with the state of California alleging that it binds merchants to “price parity.” Apparently, in order to avoid price competition with other online e-commerce sites, Amazon forces merchants to enter into agreements that severely penalize them if their products are offered at a lower price on Amazon.

In a statement, Attorney General Bonta alleges that these agreements impede the ability of other online retailers to compete, contributing to Amazon’s dominance in the online retail market and harming merchants and consumers through inflated fees and higher prices.

“For years, California consumers have paid more for their online purchases because of Amazon’s anti-competitive contracting practices,” Attorney General Bonta said in the lawsuit statement. “Amazon coerces merchants into deals that keep prices artificially high, knowing full well they can’t afford to say no. With other e-commerce platforms unable to compete on price, consumers are turning to Amazon as a one-stop-shop for all their purchases. This perpetuates Amazon’s market dominance, allowing the company to impose increasingly untenable demands on its merchants and cost consumers more at checkout across California.

“The reality is this: many of the products we buy online would be cheaper if market forces were not constrained. With today’s trial, we are fighting back. We will not allow Amazon to bend the marketplace to its will at the expense of California consumers, small business owners, and a fair and competitive economy.

Editor’s Note: If you’re a third-party seller on Amazon or a retailer competing with the retail giant and want to share your thoughts on the lawsuit and how it might affect gift industry, email Lenise Willis at lwillis@giftsanddec. com.

Amazon’s dominance in retail

With more than 160 million Prime members nationwide and around 25 million customers in California alone, Amazon is an e-commerce giant that dominates the retail space. According to a survey, 96% of all Prime members said they were more likely to purchase products from Amazon than any other online store, and 74% of all consumers go directly to Amazon when are ready to buy a specific product.

The statement from the Attorney General’s office goes on to say, “For this reason, Amazon is a go-to distribution channel for merchants, and more third-party sellers are joining Amazon every day, despite the fact that the full cost of selling on Amazon far exceeds that of selling in other online stores. As one seller put it, “We have nowhere to go and Amazon knows it.” Another said: “There is no viable alternative to Amazon for my business.”

Blocking price competition

The focus of the lawsuit is on Amazon’s alleged price-competitive blogging tactics. According to Attorney General Bonta’s office, “Amazon has orchestrated the substantial market power it now enjoys through agreements at the retail and wholesale level that prevent effective price competition on the market. online retail market. Merchants must agree not to offer lower prices elsewhere – including on competing sites like Walmart, Target, eBay and, in some cases, even on their own websites – and to accept drastic penalties such as loss of ‘Buy Box’ on Amazon or ‘compensate’ Amazon if other online stores drop their prices. Merchants who fail to comply face penalties such as downgraded listings and even the possibility of termination or suspension of their ability to sell on Amazon.

The Anonymous Sellers indicated in the release that because they pay lower fees on their own websites, as well as others, they could potentially sell their products at lower prices on those sites, however, they do not. do not because Amazon would disqualify their offers from the Buy Box, the white box on the right side of the Amazon product detail page where customers can add items to purchase to their cart.

Prosecution and redress sought

In Wednesday’s lawsuit, Attorney General Bonta alleges that these price-parity agreements expanded and solidified Amazon’s market power as an online retail store, embarrassed rivals, and drove prices above levels competition in California, in violation of the Unfair Competition Act and the Cartwright Act.

The attorney general’s lawsuit seeks an order from the San Francisco Superior Court that ends Amazon’s anti-competitive behavior and recovers damages to California consumers and the California economy. Specifically, the lawsuit asks the Court to:

  • Prohibit Amazon from entering into and enforcing its anti-competitive contracts that harm price competition;
  • Require Amazon to affirmatively notify sellers that it does not require sellers to match prices that are equivalent to off-Amazon prices;
  • Appoint a court-approved monitor to ensure that Amazon complies with the court order;
  • Order damages to compensate for the harm caused to consumers by a price increase; and
  • Order Amazon to return its ill-gotten gains and pay penalties to deter other companies considering similar actions.

A copy of the complaint, which was filed in court on Wednesday, is available here.

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