Amazon faces new antitrust claims from DC attorney general

·3-min read

Amazon (AMZN) is facing expanded antitrust claims in an amended lawsuit originally brought against the e-commerce giant in May by the Attorney General for the District of Columbia.

The original suit, filed in May, accused Amazon of illegally abusing its monopoly power and violating the District of Columbia Antitrust Act by forbidding third-party sellers from offering cheaper rates for their products on competing websites.

In the amended suit, Washington, DC Attorney General Karl Racine adds claims that Amazon had anti-competitive agreements with wholesalers, otherwise known as “first-party sellers,” that sell products to Amazon for the company to resell to its retail consumers.

“Amazon employs a different anti-competitive agreement with its first-party sellers to insulate it from competition from other online marketplaces,” the amended complaint states. “In their sales agreements, first-party sellers and Amazon agree that the first-party seller guarantees Amazon a certain minimum profit when Amazon sells the products it purchased from the first-party seller on Amazon’s online marketplace."

In the contracts, called Minimum Margin Agreements, the attorney general alleges, first-party sellers must agree to a minimum profit for Amazon. In the event that Amazon sells the product for a price that falls short of that profit, the agreement dictates that first-party sellers have to pay Amazon the difference in an arrangement called a "true-up," according to the amended complaint.

Andy Jassy, CEO Amazon Web Services, speaks at the WSJD Live conference in Laguna Beach, California, U.S., October 25, 2016.     REUTERS/Mike Blake
Andy Jassy, then CEO Amazon Web Services and now CEO of Amazon, speaks at the WSJD Live conference in Laguna Beach, California, U.S., October 25, 2016. REUTERS/Mike Blake

As a result, Racine concludes, the sellers have an incentive to charge more for their products on non-Amazon marketplaces to ensure that Amazon doesn't drop its price based on lower prices elsewhere. 

“These agreements reduce other online marketplaces’ ability to compete with Amazon by offering lower prices to consumers,” Racine said in a prepared statement.

'We offer low prices across a broad selection'

In the first complaint, the AG targeted Amazon’s rules for allegedly increasing the price of retail items across the entire online marketplace, ultimately harming both everyday consumers and third-party sellers.

Amazon's third-party seller agreement, up until at least 2019, the complaint alleged, included a clause that explicitly barred sellers from offering products on competing sites.

The claims went on to say that Amazon "suppressed competition from other online retail sales platforms, such as eBay, Walmart, and even the TPSs’ own websites."

The AG has asked for the court to prevent Amazon from continuing its alleged anticompetitive conduct, including through mandatory divestitures, if necessary, and by appointing a corporate monitor to ensure compliance with any court-imposed remedies. The AG is also asking for monetary damages but did not specify the amount, and for the court to strip Amazon of any illegally obtained gains.

Yahoo Finance reached out to Amazon for comment on the expanded antitrust claims and will update this story if it receives a response. In a prior statement, in response to the first complaint, an Amazon spokesperson told Yahoo Finance that the DC AG has the situation backwards.

"Sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively," the spokesperson said.

"The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”

Amazon has been under scrutiny from a laundry list of agencies, including the House Judiciary Committee, the Federal Trade Commission, and the Department of Justice, as well as state attorneys general in California, New York, and Washington.

Alexis Keenan is a legal reporter for Yahoo Finance and former litigation attorney. Follow Alexis Keenan on Twitter @alexiskweed.

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