California Attorney General Rob Bonta has accused the e-commerce giant of effectively coercing merchants into giving Amazon their best prices.
California Attorney General Rob Bonta has filed an antitrust lawsuit against Amazon, claiming that the company’s alleged anticompetitive practices are intended to stifle its competition and increase consumer prices across the internet.
According to The New York Times, the lawsuit is limited in its scope to California, where Amazon has an estimated 25 million customers.
However, if Bonta’s claim succeeds in court, it could have far-reaching implications across the entire country.
“If you think about Californians paying even just a little bit more for every product they purchased online over the course of a year, let alone a decade, which is what is at issue here, the collective magnitude of harm here is very far-reaching,” Bonta said in a press conference.
“The ‘everything store’ has effectively set a price floor, costing Californians more for just about everything,” Bonta added.
The lawsuit, notes The New York Times, largely focuses on Amazon’s practice of penalizing independent merchants for listing their products at lower prices on other websites.
If and when Amazon finds a product listed for less money on another website, the company routinely removes important functions from the seller’s Amazon page, including the “Buy Now” and “Add to Cart” buttons.
Those buttons, says the Times, are critically important to smaller merchants—when Amazon removes them from seller pages, they have the potential to significant curtail sales.
Bonta claims that Amazon’s policy of restricting features puts merchants in a dilemma: while some websites might charge lower usage fees, thereby enabling the seller to list products for a lower price than they could on Amazon, the loss of critical functions on Amazon.com is often sufficient threat to make retailer’s toe the line.
Most merchants, says the New York Times, end up increasing their prices on other websites than risk losing their access to the world’s largest e-commerce platform.
“Without basic price competition, without different online sites trying to outdo each other with lower prices, prices artificially stabilize at levels higher than would be the case in a competitive market,” Bonta’s lawsuit states.
“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,” Bonta said. “This perpetuates Amazon’s market dominance.”
Amazon, notes The Guardian, has defended against similar litigation by saying that, while sellers can set their own prices on different platforms, Amazon also reserves the right to “highlight” products that are not priced competitively.
However, and in spite of its defense, critics have railed against Amazon’s practices, saying the company’s prominent position allows it to effectively regulate its competitors’ prices.
“The relief the (attorney general) seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law,” Amazon said in response to Bonta’s claims.
Amazon, adds Reuters, had earlier offered to make policy changes to avoid Bonta’s lawsuit.
However, Bonta rejected the proposed reforms as inadequate.