California Files Antitrust Lawsuit Against Amazon, Company Accused of Being Anticompetitive

On Wednesday, the state of California sued the company Amazon, the world’s largest retailer and cloud service provider, alleging that they are monopolizing their market and inflating prices by creating restrictive deals with their sellers. The state accuses Amazon of making Californians pay more than they should for their products.

“For years, California consumers have paid more for their online purchases because of Amazon's anticompetitive contracting practices,” California Attorney General Rob Bonta said in a statement. “Amazon coerces merchants into agreements that keep prices artificially high, knowing full well that they can't afford to say no.”

Amazon is accused of actively penalizing sellers if they offer their products for lower prices on competing websites. For instance, if the company finds one of their sellers marketing a product for a lower price on a competing website, they allegedly remove the “Buy Now” or “Add to Cart” buttons from the products page as a way to punish the seller for their “disloyalty” to Amazon.

In doing so, the online retail giant is said to be in violation of California’s Unfair Competition Law and Cartwright Act, according to the Prosecutor’s Office.

“With today’s lawsuit, we’re fighting back,” Bonta added. “We won’t allow Amazon to bend the market to its will at the expense of California consumers, small-business owners and a fair and competitive economy.”

Amazon is making it difficult for other merchants to compete, they are dominating the online retail market, the complaint alleges, and in doing so, they are forcing consumers to pay more for their products with artificially inflated prices and fees.

In one instance, a “large consumer electronics device supplier” tried to offer a discount to their shoppers through a competitor of Amazon. Amazon then demanded $100,000 from the supplier in order to maintain their profit margin deal. Following the confrontation, the supplier was less likely to offer discounts on products.

“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,” the complaint said.

Merchants are also in a tight corner when it comes to selling on Amazon. Selling their products on competing websites would be cheaper and more cost-effective, but Amazon is such a popular website in the consumer industry that sellers don’t want to miss out on the market. Therefore they’d rather risk raising their prices on other sites than risk getting penalized by Amazon, which has more than 160 million Prime members nationwide and about 25 million customers in California alone, according to the Prosecutor's Office.

The Prosecutor’s Office also found in a survey among consumers that 96% of all Prime members say they are more likely to buy products from Amazon as opposed to other online stores, while 74% of all consumers go directly to Amazon when in search of a specific product.

“With other e-commerce platforms unable to compete on price, consumers turn to Amazon as a one-stop shop for all their purchases,” the Prosecutor’s Office said. “This perpetuates Amazon's market dominance, allowing the company to make increasingly untenable demands on its merchants and costing consumers more at checkout across California. The reality is: Many of the products we buy online would be cheaper if market forces were left unconstrained.”

The Prosecutor’s Office is seeking damages for California’s consumers and the state’s economy as well as other penalties and is requesting Amazon cease their anticompetitive behavior through the San Francisco Superior Court.

A similar lawsuit took place last year when D.C. Attorney General Karl A. Racine filed an antitrust lawsuit against the retailer to end their anticompetitive practices, but the suit was thrown out this year. Racine filed a notice in August to appeal the decision. The Federal Trade Commission has also been investigating the company’s monopoly practices, while Capitol Hill has kept its eyes on the retailer and is hoping to combat these same egregious tactics. Amazon has responded with extensive lobbying campaigns.