The District of Columbia filed an antitrust lawsuit against online retailing giant Amazon, accusing the Seattle-based company of using its market power to harm consumers.
Amazon is the world’s largest online retail platform. As of May 25, the company had a market capitalization of $1.63 trillion, and according to The Wall Street Journal, was close to completing a deal to acquire MGM, the Hollywood movie-making studio.
Amazon unlawfully uses price agreements to stifle competition, District of Columbia Attorney General Karl Racine, a Democrat, said in a statement.
“Amazon has used its dominant position in the online retail market to win at all costs. 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,” he said.
“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.”
Since Amazon was started, founder Jeff Bezos made it clear the company planned to forgo short-term profitability and instead expand its market share. Amazon now has an estimated 50 to 70 percent market share of online retail sales. The next two largest retail platforms, Walmart.com and eBay, each control only about 5 percent, according to the complaint.
“Amazon controls an even larger market share of multi-seller online retail platforms, like Walmart.com and eBay. Amazon is, by far, the most-visited website for online retail shopping, with 2.6 billion visits in a single month. Sixty-six percent of consumers start their search for new products on Amazon, and a staggering 74% go directly to Amazon when they are ready to buy a specific product. Given its ubiquitous presence in the online retail sales market, Amazon’s business practices and decisions have an outsized effect on the U.S. economy.”
The complaint alleges that Amazon is liable for four counts of violating the District of Columbia’s Antitrust Act. Specifically, the company is accused of forming both a horizontal agreement and a vertical agreement in restraint of trade, attempting monopolization, and illegally maintaining a monopoly. The D.C. government asks the court to order Amazon not to engage in anticompetitive conduct and to impose “structural relief,” which could include breaking up the company.
The complaint states that instead of enabling consumers to obtain the best products at the lowest prices, “Amazon instead causes prices across the entire online retail sales market to be artificially inflated, both for products sold on Amazon’s online retail sales platform and on its competitors’ online retail sales platforms.”
For years, Amazon has required that third-party sellers (TPSs) who want to sell their products on Amazon’s online retail sales platform execute its Business Solutions Agreement (BSA). Until at least 2019 in the United States, the BSA included a clause that explicitly prohibited TPSs from offering their products on a competing online retail sales platform, including the TPS’s own website, at a lower price or on better terms than the TPS offered the products on Amazon. This prohibition was called the price parity provision (PPP), the complaint states.
By means of this anticompetitive restraint, Amazon “suppressed competition from other online retail sales platforms, such as eBay, Walmart, and even the TPSs’ own websites” and “artificially raised the price of goods to consumers across the online retail sales market, because TPSs were forced to incorporate Amazon’s high fees and costs into their product prices not only when selling on Amazon, but also when selling across the entire online retail sales market by virtue of the PPP.”
The resultant higher prices hurt competition and consumers as well as reduced consumer choice, innovation, and competition “among online retail sales platforms, as other online retail sales platforms were not able to use lower product prices to lure buyers and sellers to their competing online retail sales platform and capture some of Amazon’s dominant market share.”
Amazon removed the PPP clause from its BSA in March 2019, replacing it with a similarly worded “fair pricing policy.” The policy allows the company to punish third-party sellers if they offer their product for a lower price on a competing website.
Amazon told The Epoch Times that Racine is mistaken.
“The DC Attorney General has it exactly backwards—sellers set their own prices for the products they offer in our store,” a corporate spokesperson said in a statement.
“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.”
