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05/25/2021

Washington, D.C. attorney general sues Amazon, alleging price manipulation

Dan Berthiaume
Senior Editor, Technology
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The attorney general of Washington, D.C., Karl A. Racine, is accusing Amazon of anticompetitive practices in a new lawsuit.

In a civil complaint, filed in D.C. Superior Court, the office of the Washington, D.C., attorney general alleges that Amazon has fixed online retail prices through contract provisions and policies it applies to third-party sellers on its platform. These provisions and policies, known as “most favored nation” (MFN) agreements, prevent third-party sellers that offer products on Amazon.com from offering their products at lower prices or on better terms on any other online platform, including their own websites. 

According to the complaint, these agreements effectively require third-party sellers to incorporate the high fees charged by Amazon – as much as 40% of the total product price – not only into the price charged to customers on Amazon’s platform, but also on any other online retail platform. As a result, the attorney general’s office says the agreements impose an “artificially high” price floor across the online retail marketplace and allow Amazon to build and maintain monopoly power in violation of the District of Columbia’s Antitrust Act. 

The attorney general’s office also says these agreements harm consumers and third-party sellers while suppressing competition, choice, and innovation. The complaint seeks to put an end to Amazon’s control over online retail pricing, as well as collect damages, penalties, and attorney’s fees.

“Amazon has used its dominant position in the online retail market to win at all costs,” Racine said in an official press release. “It maximizes its profits at the expense of third-party sellers and consumers, while harming competition, stifling innovation, and illegally tilting the playing field in its favor. We filed this antitrust lawsuit to put an end to Amazon’s illegal control of prices across the online retail market. We need a fair online marketplace that expands options available to District residents and promotes competition, innovation, and choice.”

An Amazon spokesperson issued the following official statement rebutting the complaint to CNBC: “The D.C. attorney general has it exactly backwards — 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 relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”

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.