Amazon Faces California Lawsuit Over Alleged Anti-Competitive Practices

As the dominant presence in online retail, Amazon often faces accusations of anti-competitive behavior. Both American and European regulators have examined its actions closely. Most recently, California Attorney General Rob Bonta filed a lawsuit against Amazon that alleges violations of state antitrust and unfair competition laws.

The lawsuit filed last week focuses on Amazon policies toward third-party sellers on its platform. Some third-party merchants offer their products both at Amazon and at other online marketplaces. If they offer the same products for lower prices elsewhere, according to the lawsuit, Amazon may place their listings lower in search results or even prevent them from posting more listings. As a result, a third-party merchant that wants to get full access to Amazon buyers allegedly must sell its products for at least a certain minimum price across all platforms. The alleged “price floor” violates antitrust and related laws, which require free competition. Artificially inflated prices mean that consumers pay more for items than what they should be worth.

According to California, this anti-competitive dynamic may arise in part from the fees that Amazon charges to third-party sellers. Recognizing its dominance in online retail, Amazon imposes higher fees to use its platform than do similar platforms. In theory, a seller could simply walk away and decline to sell their products on Amazon, but most do not see this strategy as viable. Instead, sellers raise the Amazon prices of their products to offset the higher fees. They do not need to charge such high prices on platforms that impose lower fees, which explains why the same products could be sold for less elsewhere. Since Amazon penalizes them for this discrepancy, however, sellers must raise their prices elsewhere as well.

California may face an uphill battle in court. This spring, Amazon secured a dismissal in an antitrust lawsuit filed by the Washington, D.C. Attorney General on similar grounds. The D.C. Attorney General appealed the decision, though, so that outcome is not final. Meanwhile, Amazon vigorously denied the allegations in the California lawsuit.

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