California is suing Amazon, the state’s attorney general announced Wednesday in a press release. The focus of the lawsuit, filed in the state’s Superior Court in San Francisco County, is on how Amazon allegedly crushes competition and inflates prices through restrictive agreements with its third-party sellers.
Contracts between Amazon and its sellers effectively prevent the platform’s merchants from offering lower prices elsewhere—even though Amazon is a relatively expensive site for sellers to use, the suit says.
“These agreements thwart the ability of other online retailers to compete, contributing to Amazon’s dominance in the online retail marketplace and harming merchants and consumers through inflated fees and higher prices,” AG Rob Bonta’s announcement claimed.
In other words: if a third-party merchant offers a product on, say, their own website (where there are no associated fees to sell) at a cheaper rate than on Amazon’s site, the massive e-tailer can retaliate, per these agreements. Some of those retaliatory practices have allegedly included removing the “Buy Now” or “Add to Cart” buttons from a merchant’s page, which can end up forcing sellers to either drop their prices on Amazon or raise them everywhere else.
This results in a “vicious anticompetitive cycle in which Amazon wins and its third-party sellers, its wholesale suppliers, consumers, and competition lose,” reads the legal complaint.
And for online sellers, abandoning Amazon to avoid the costs and hiked prices is nigh impossible. “We have nowhere else to go and Amazon knows it,” says the complaint, quoting an unnamed retailer.
Amazon has around 25 million customers in California, comprising nearly 16% of the company’s customer Prime member base nationally, according to the AG’s press release. If successful, the state’s legal fight could set a nationwide precedent, as California litigation and legislation has in the past.
The California complaint is only the latest in a string of recent actions and critiques accusing Amazon of anticompetitive policies. The Federal Trade Commission has investigated Amazon’s practices multiple times in recent years, fining the company $61.7 million in Feb. 2021.
Congress has called on the Justice Department to investigate the company for allegedly obstructing one of those federal antitrust probes. And the company faced a years-long investigation in the European Union, which it recently attempted to settle with a list of concessions.
In response to some of the criticism and probes, Amazon has agreed to scale back its private-label products for sale on the platform. However, the company has also funneled nearly $1 million towards lobbying efforts in the hopes of squashing proposed U.S. antitrust legislation.
Internal documents leaked in October 2021 showed how Amazon was purposely using its own brands to undercut other sellers. And an earlier report from the Wall Street Journal demonstrated related practices.
A suit with a nearly identical premise to the new California case was filed in D.C. court and dismissed earlier this year. Yet Bonta’s office is optimistic that the lawsuit, which is the result of two years of investigation, will lead to a different outcome, according to a report from The New York Times: “An official in Mr. Bonta’s office said the California attorney general expected to succeed where D.C. has stumbled by providing far more details on how Amazon was hurting consumers, and because California state law provides stronger consumer protections.”
In a response to Gizmodo’s request for comment, an Amazon spokesperson sent the following statement in an email: “Similar to the D.C. Attorney General—whose complaint was dismissed by the courts—the California Attorney General has it exactly backwards. Sellers set their own prices for the products they offer in our store… 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 D.C. court and dismiss this lawsuit promptly.”