California’s attorney general filed an antitrust lawsuit against Amazon on Wednesday, claiming the retailer stifles competition and increases the costs consumers pay across the web.
The suit is proscribed to California, where officials said Amazon had around 25 million customers, but when it succeeds it could have a broad impact across the country.
“Should you take into consideration Californians paying even just slightly bit more for each product they purchased online over the course of a yr, let alone a decade, which is what’s at issue here, the collective magnitude of harm here could be very far-reaching,” said Rob Bonta, California’s attorney general, during a news conference announcing the case.
“The all the things store has effectively set a price floor, costing Californians more for almost all the things,” he said.
The lawsuit largely focuses on the way in which Amazon penalizes sellers for listing products at lower prices on other web sites. If Amazon spots a product listed for cheaper on a competitor’s website, it often will remove essential buttons like “Buy Now” and “Add to Cart” from a product listing page.
Those buttons are a significant driver of sales for firms selling though Amazon, and losing them can quickly hurt their businesses.
That creates a dilemma for marketplace sellers. At times, they’ll offer products for lower prices on sites aside from Amazon because the associated fee of using those sites could be lower. But because Amazon is by far the biggest online retailer, the sellers would slightly raise their prices on other sites than risk losing their sales on Amazon, the criticism said, citing interviews with sellers, competitors and industry consultants.
“Without basic price cutting war, without different online sites attempting to outdo one another with lower prices, prices artificially stabilize at levels higher than could be the case in a competitive market,” the criticism said.
The California suit is the most recent in a string of increasingly aggressive efforts by states and regulators in Washington and Europe to curb the influence of the technology industry’s biggest firms. Also on Wednesday, a European Union court gave its blessing to a record multibillion-dollar tremendous issued against Google in 2018.
The lawsuit echoes a case brought by Karl A. Racine, the attorney general for the District of Columbia, that was thrown out this spring. Judge Hiram E. Puig-Lugo of the Superior Court of the District of Columbia found Mr. Racine didn’t provide sufficient evidence Amazon’s policies were anti-competitive. Mr. Racine is appealing the ruling.
“Much like the D.C. attorney general — whose criticism was dismissed by the courts — the California attorney general has it exactly backwards,” Alex Haurek, an Amazon spokesman, said in an announcement. “Sellers set their very own prices for the products they provide in our store.”
Amazon hopes the suit can be dismissed, Mr. Haurek said, and it takes pride in offering low prices “across the broadest selection, and like several store we reserve the correct not to focus on offers to customers that are usually not priced competitively.”
Most of Amazon’s sales — 57 percent of units last quarter — are of products offered by third-party merchants on Amazon’s website. They pay Amazon a referral fee to list their products, and sometimes pay for Amazon’s success services, promoting and other offerings. Amazon collected greater than $100 billion in third-party service fees within the last 12 months, in accordance with its financial filings.
California has been investigating Amazon for greater than two years, and the criticism, filed in San Francisco Superior Court, said the practices violated California’s Unfair Competition Law and the Cartwright Act, the state’s primary antitrust law. It asked for remedies that included ending the anticompetitive behavior and paying penalties.
Mr. Haurek said the relief sought within the case “would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”
Mr. Bonta said he thought the case would succeed where D.C. has stumbled by providing way more details on how Amazon was hurting consumers, saying there was more research “than every other case has ever seen,” and since it was brought under California state law, which provides stronger protections.
The criticism said Amazon was in a position to charge sellers greater than competitors since it captures a lot of online sales. The rising costs for sellers include success and paying for promoting, which sellers increasingly see as a necessity to succeed. The criticism heavily cites internal Amazon documents which can be redacted.
The result was an “anticompetitive cycle,” the criticism said, where sellers must raise prices on Amazon to recoup their costs. But due to Amazon’s pricing provisions, sellers should have higher prices on other sites, and “other online stores cannot effectively attract consumers away from Amazon with lower prices.”
Mr. Bonta’s criticism quoted emails between a private care electronics brand and one other retailer, asking the retailer to lift prices on a reduced item because Amazon suppressed their listing. The brand wanted “to remove all deals and inventory until Q1 since this has happened several times and is causing an enormous disruption to the Amazon business,” it wrote. “We simply cannot afford buy-box shutdowns on Amazon anymore.”
The criticism said the vendor no was longer supplying products to the competitor.
The California lawsuit comes because the Federal Trade Commission, led by Lina Khan, a critic of Amazon, is investigating whether the corporate has broken antitrust laws. The agency can also be looking into the method through which consumers buy or cancel an Amazon Prime membership, which some say could be deliberately confusing.
Amazon has attacked the F.T.C. several times throughout the investigations. It said last yr that Ms. Khan, who wrote a breakout law review critique of the corporate’s power, should recuse herself from antitrust inquiries into the corporate.
Last month, Amazon moved to stop the agency’s requests to interview Jeff Bezos, Amazon’s founder, and its chief executive, Andy Jassy, within the Prime inquiry on the grounds that the requests were “calculated to serve no other purpose than to harass Amazon’s highest-ranking executives and disrupt its business operations.”
Lawmakers in Washington even have Amazon of their sights. The corporate has aggressively fought a bipartisan antitrust bill that will stop Amazon from favoring its own products in its online store. The proposed law has yet to pass, and its probabilities may dim further as lawmakers turn their attention to the midterm elections.
The corporate has been more diplomatic in other cases. Facing an inquiry into its retail practices in Europe, the corporate proposed a series of changes, including limiting the information it collects from rival sellers and allowing them to sell to Prime customers without using Amazon’s logistics program.