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09/15/2022

California sues Amazon for alleged price inflation

Dan Berthiaume
Senior Editor, Technology
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Amazon faces a lawsuit from the state of California.

The attorney general of California is accusing Amazon of anti-competitive practices.

In a lawsuit filed against Amazon on Thursday, Sep. 15, 2022, California Attorney General Rob Bonta alleged that the company stifled competition and caused increased prices across California through anticompetitive contracting practices with its third-party marketplace sellers, in violation of California’s Unfair Competition Law and Cartwright Act.

In order to avoid competing on prices with other online e-commerce sites, Bonta’s suit says that Amazon requires third-party sellers to enter agreements that penalize them if their products are offered for a lower price off-Amazon. The lawsuit alleges that these agreements prevent other online retailers from competing, contributing to Amazon's e-commerce dominance and harming retailers and consumers through inflated fees and higher prices.

“For years, California consumers have paid more for their online purchases because of Amazon's anticompetitive contracting practices,” said Bonta. “Amazon coerces merchants into agreements that keep prices artificially high, knowing full well that they can't afford to say no. 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, allowing the company to make increasingly untenable demands on its merchants and costing consumers more at checkout across California,” Bonta said. “The reality is, many of the products we buy online would be cheaper if market forces were left unconstrained. We won't allow Amazon to bend the market to its will at the expense of California consumers, small business owners, and a fair and competitive economy.”

The lawsuit seeks an order from the San Francisco Superior Court that stops Amazon's anticompetitive 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 anticompetitive contracts that harm price competition;
  • Require Amazon to affirmatively notify vendors that it does not require sellers to offer prices on par with off-Amazon prices; 
  • Appoint a court-approved monitor to ensure Amazon’s compliance with the court’s order;
  • Order damages to compensate for the harms to consumers through increased prices; and,
  • Order Amazon to return its excessive and pay penalties. 

A copy of the complaint, which was submitted to the San Francisco Superior Court on Thursday, Sep. 15, is available here.

Previous Amazon antitrust issues
Amazon has faced other antitrust investigations from state and federal government. In January 2022, as a result of a price-fixing investigation from the Washington state attorney general, Amazon shuttered the “Sold by Amazon” program that let it set prices with third-party sellers.

In May 2021, Washington, D.C. Attorney General Karl A. Racine accused Amazon of anticompetitive practices in a civil complaint, filed in D.C. Superior Court. The suit alleges that Amazon has fixed online retail prices through contract provisions and policies it applies to third-party sellers on its platform.

And the federal government has been scrutinizing Amazon for potentially anticompetitive practices since at least 2019, when the Federal Trade Commission (FTC) officially took on the role of overseeing the e-tail giant. National political figures as diverse as Sen. Elizabeth Warren (D-Massachusetts) and former U.S. Treasury Secretary Steven Mnuchin have publicly criticized Amazon for its business practices.