May 25, 2021 by Ethics in Tech board member Brett Wilkins for Common Dreams
Washington, D.C. Attorney General Karl Racine on Tuesday sued e-commerce giant Amazon, accusing the world’s largest retailer of monopolistic price-fixing, stifling competition in the online retail space, and depriving consumers of choice.
The lawsuit (pdf), filed in D.C. Superior Court, accuses the Seattle-based company—which controls between 50% and 70% of all U.S. retail sales and upon which over two million independent, third-party sellers (TPSs) rely—of “anti-competitive business practices.”
According to a statement from Racine’s office:
Amazon fixed online retail prices through contract provisions and policies it previously and currently 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.
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, these 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 effects of these agreements continue to be far-reaching as they harm consumers and third-party sellers, and suppress competition, choice, and innovation. [The Office of the Attorney General] is seeking to put an end to Amazon’s control over online retail pricing, as well as damages, penalties, and attorney’s fees.
“Amazon has used its dominant position in the online retail market to win at all costs,” said Racine, a Democrat. “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.”
The lawsuit specifically alleges that Amazon:
- Raises prices for consumers: Amazon’s MFNs harm consumers by artificially inflating prices they pay for products purchased across the online retail market. When third-party sellers sell on Amazon, they must pass on the cost of Amazon’s high fees and commissions to consumers.
- Stifles competition in the online retail market: Amazon maintains its dominance in online retail by preventing other platforms from competing on price to win market share. The most important factor in online shoppers’ purchasing decisions is price. By ensuring that third-party sellers cannot offer lower prices elsewhere online, Amazon insulates itself from meaningful competition.
- Deprives consumers of choice: Amazon’s anti-competitive actions have resulted in less choice for consumers in the online retail market, suppressed innovation, and reduced investment in potentially-competing platforms.
“We need a fair online marketplace that expands options available to District residents and promotes competition, innovation, and choice,” Racine asserted.
Racine’s office also said the suit “seeks to recover damages and impose penalties to deter similar conduct by Amazon and other companies.”
Although the lawsuit is limited in scope as it was filed in a D.C. and not a federal court, it was still welcomed by digital and consumer rights advocates.
Vahid Razavi, founder of the San Francisco-based nonprofit advocacy group Ethics in Tech and a former Amazon Web Services manager, told Common Dreams that “the lower prices that Amazon prides itself on come at the expense of its vendors and partners.”
“For every product category, [Amazon has] an in-house brand to compete with it,” said Razavi, whose group has petitioned Congress to break up Amazon. “When you control the product and its supply chain to the consumer without any third party at mass scale, things get scary for the shop on Main Street. That’s when you start seeing tumbleweeds.”
Stacy Mitchell, co-director of the D.C.-based Institute for Local Self-Reliance, told the Washington Post that “to have a truly competitive e-commerce market, you have to break up Amazon” because “there’s a fundamental conflict of interest when you own the infrastructure and you also compete on that infrastructure.”
The New York Times reports the Federal Trade Commission is currently investigating whether Amazon has violated any federal antitrust laws, while states including California, New York, and Washington have conducted their own inquiries.
Last October, the U.S. House Judiciary Committee released a major report calling on Congress to overhaul U.S. antitrust law and take action to curtail the power of tech titans Amazon, Apple, Facebook, and Google—including possibly breaking them up.
The committee report noted that the tech giants’ “monopoly power” has “diminished consumer choice, eroded innovation and entrepreneurship in the U.S. economy, weakened the vibrancy of the free and diverse press, and undermined Americans’ privacy.”
“Each platform now serves as a gatekeeper over a key channel of distribution,” the report said. “By controlling access to markets, these giants can pick winners and losers throughout our economy.”
Photo: Gov. Phil Murphy/Flickr Creative Commons