California hits Amazon with unfair competition lawsuit

Attorney General Rob Bonta said an investigation revealed more than a decade of anticompetitive practices.

California Attorney General Rob Bonta held a press conference in San Francisco on Wednesday announcing an antitrust lawsuit against Amazon. (Screenshot from the Attorney General’s California livestream website via Courthouse News)

SAN FRANCISCO, Calif. (CN) — California Attorney General Rob Bonta announced an antitrust suit against Amazon on Wednesday, claiming the company broke the law and stifled competition for years that led to higher prices for families across California.

Bonta claims Amazon’s practices of penalizing merchants if they offer products at lower prices on other websites thwart the ability of other online retailers to compete. He said the company’s required agreements with merchants drive its own dominance in the online retail marketplace, and harm smaller businesses and consumers with inflated fees and higher prices.

At a press conference Wednesday, Bonta said the case filed in San Francisco Superior Court stems from an investigation taking place over more than two years. Amazon is the country’s dominant online retail store, with more than 160 million Prime members nationwide and around 25 million customers in California. According to one survey, 96% of all Prime members said that they are more likely to buy products from Amazon than any other online store, and 74% of all consumers go to Amazon to buy a specific product.

In other words, merchants must use Amazon. “They can’t succeed without it,” Bonta said.

But in required contracts to sell on the website, merchants must agree not to offer lower prices elsewhere — including competing sites like Walmart, Target, eBay and sometimes on their own websites — and accept drastic penalties like loss of the “Buy Box” on Amazon or to “compensate” Amazon if other online stores do lower their prices. Merchants that do not comply face sanctions such as less prominent listings and even the possibility of termination or suspension of their seller accounts.

“In order to avoid competing with other e-commerce sites, since 2012 Amazon required sellers to enter contracts severely penalizing them if their products are offered for a lower price off Amazon,” Bonta said. “Through its illegal actions, the ‘everything’ store has effectively set a price floor, costing families more for just about everything.”

Bonta claims sellers reported they could “pay less in fees on our own and other websites,” but that they do not attempt to do this because “Amazon will disqualify (our) offers from the Buy Box.”

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