The state of California accused Amazon of violating competition law with practices that prevent sellers from offering lower prices elsewhere. The lawsuit from the most populous US state says the measures hurt rivals and made online shopping more expensive for everyone.
It marks the most significant legal threat Amazon has ever faced in the US.
But a similar lawsuit was dismissed in the US earlier this year for insufficient evidence of higher prices. Proving harm to consumers through higher prices is a key issue in US competition law.
Amazon said that, like the DC case, the California lawsuit was “exactly the other way around” and that the lawsuit should be dismissed.
“Sellers set their prices for the products they offer in our store,” the company said. “Amazon takes pride in 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.”
In the complaint, California says Amazon’s contracts require sellers to offer the lowest price on Amazon, restraining the ability of other websites to compete.
By protecting Amazon’s market dominance, the deals give the firm freedom to raise fees on merchants, which eventually hit consumers through higher prices.
“Amazon knows its price parity agreements prevent rivals from stealing market share away with lower prices reflective of their lower fees. So Amazon keeps raising fees, leading to higher prices on Amazon and higher prices off Amazon due to price parity,” the lawsuit says.
It said this created “a vicious anticompetitive cycle in which Amazon wins, and its third-party sellers, its wholesale suppliers, consumers, and competition lose”.
The lawsuit also accuses Amazon of punishing merchants who run afoul of the rules with tactics such as moving their listings lower in search results,
“The reality is: Many of the products we buy online would be cheaper if market forces were left unconstrained,” California Attorney General Rob Bonta said in a statement announcing the lawsuit.
Though the lawsuit is limited to California, its effect could be far-reaching given California’s size. The lawsuit comes as regulators, especially in the European Union, increasingly question the dominance of a handful of tech giants.
This summer, Amazon sought to settle a case brought by the EU, which accused it of using data it collects on sellers to compete against them. Amazon is also under investigation in the UK over concerns that the company is giving an unfair advantage to certain sellers on its marketplace.
Meanwhile, an EU court this week also largely upheld a record fine against Google for using the Android platform to cement its search engine’s dominance.