California’s Attorney General sued Amazon on Wednesday, claiming the internet titan illegally stifles competition by punishing vendors for selling their products at cheaper prices on other online stores.
Rob Bonta filed a lawsuit [PDF] on behalf of Golden State residents in a San Francisco Superior Court, accusing the ecommerce giant of violating California’s Unfair Competition Law and Cartwright Act. It claims Amazon bullies sellers into signing agreements that threaten to penalize them if they list their items at a lower cost on other sites.
“Amazon coerces merchants into agreements that keep prices artificially high, knowing full well that they can’t afford to say no,” the Cali AG said in a statement.
“With other ecommerce platforms unable to compete on price, consumers turn to Amazon as a one-stop shop for all their purchases. 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.”
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Merchants who break the rules face Amazon removing the “Buy Box” on the item’s page, which allows buyers to easily add the product to their Amazon shopping cart, it’s claimed. The vendors’ product listings may be downgraded in searches and their vendor accounts may even be terminated or suspended, it was alleged. If a seller does offer a product online for less than the Amazon price, the e-souk demands compensation, the lawsuit claims.
Amazon is the largest US online retailer with more than 160 million people with Prime accounts in the country and has around 25 million customers in California. Many sellers rely on the ecommerce goliath to reach more customers. But Amazon’s draconian rules are anticompetitive, and suppress smaller businesses and control costs for consumers, Bonta argued.
The strict rule also prevents bigger companies like Walmart, Target, or eBay from competing fairly with Amazon, too, it’s said. One ecommerce consultant reportedly said other retailers often “charge much lower fees” than Amazon. These lower fees mean vendors can offer lower prices for items on other sites, but are prevented from doing so in case they are penalized by Amazon.
“The policy and spirit of the California antitrust laws are to promote the free play of competitive market forces and the lower prices to consumers that result,” the lawsuit said.
“Amazon, the dominant online retail store in the United States, has violated the policy, spirit, and letter of those laws by imposing agreements at the retail and wholesale level that have prevented effective price competition across a wide swath of online marketplaces and stores.”
Bonta’s argued Amazon’s dominance and anticompetitive practices harmed California’s economy.
“The reality is: Many of the products we buy online would be cheaper if market forces were left unconstrained. With today’s lawsuit, we’re fighting back. 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,” Bonta said.
The Register has asked Amazon for comment. ®