Amazon sued by Washington DC over pricing for merchants

Washington DC has sued Amazon for allegedly violating the district’s competition laws by illegally tying merchants to restrictive selling rules.

Karl Racine, attorney-general for the District of Columbia, accused the ecommerce giant of charging third-party merchants fees of as much as 40 per cent of a product’s price to sell through its website, and then requiring them not to charge less on other platforms.

The company has already been charged in the European Union over its treatment of European merchants who use its platform to sell goods, but this is the first time it has faced similar accusations in the United States.

It comes at a time when several large technology companies are facing charges of anti-competitive behaviour. Mr Racine is one of dozens of attorneys-general also pursuing antitrust cases against Facebook and Google.

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‘Restrictive contracts’

The new lawsuit, launched on Tuesday, claimed Amazon’s “restrictive contracts” artificially inflate prices for consumers.

“Amazon wins because it controls pricing across the online retail sales market, putting itself at an advantage over everyone else,” he said. “As a result, Amazon is increasing its dominant stronghold on the market and illegally reducing the ability of other platforms to compete for market share.”

Amazon said in 2019 it would no longer bar third-party sellers from selling their goods cheaper elsewhere, following criticism from senior Democrats such as Elizabeth Warren, the Massachusetts senator. Mr Racine’s lawsuit accuses the company of continuing the practice, however, through its “fair pricing policy”, which allows it to ban merchants who offer lower prices elsewhere.

“The DC attorney-general has it exactly backwards – sellers set their own prices for the products they offer in our store,” the company said in a statement. “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.”

Test case

The case brought by Mr Racine applies only to violations of the District of Columbia’s rules. But it will be seen as a test for whether other states and federal agencies can build their own cases against Amazon.

The DC case advances arguments made by congressional Democrats, who wrote in a report last year that Amazon was guilty of using its dominance to treat third-party sellers unfairly and using their data to help improve its own competing products.

Currently president of the National Association of Attorneys-General, Mr Racine is reportedly under consideration by US president Joe Biden to lead the Federal Trade Commission (FTC).

The FTC has responsibility for investigating Amazon’s competitive practices under a deal struck two years ago with the US department of justice, though the commission has not said whether it is actively pursuing a case against the company. Mr Biden has nominated Lina Khan, one of the company’s most outspoken critics, as a commissioner.

Asked about reports that he might be picked to lead the FTC, Mr Racine said: “The FTC matter is something that the president will decide.”

– Copyright The Financial Times Limited 2021