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PREVIOUSLY

• Amazon Confirms Plans for a Distribution Warehouse in McKinleyville

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Press release from the office of California Attorney General Rob Bonta:

California Attorney General Rob Bonta last night filed a request for a preliminary injunction in California’s existing case against Amazon for price fixing. Attorney General Bonta’s 2022 lawsuit alleged that the company stifled competition and caused increased prices across California through its anticompetitive policies in order to avoid competing on price with other retailers.

New evidence paints a clearer and more shocking picture. The motion for a preliminary injunction comes after a robust discovery process where California uncovered evidence of countless interactions in which Amazon, vendors, and Amazon’s competitors agree to increase and fix the prices of products on other retail websites to bolster Amazon’s profits.

Time and again, across years and product categories, Amazon has reached out to its vendors and instructed them to increase retail prices on competitors’ websites, threatening dire consequences if vendors do not comply.

Vendors, bullied by Amazon’s overwhelming bargaining leverage and fearing punishment, comply — agreeing to raise prices on competitors’ websites (often with the awareness and cooperation of the competing retailer), or to remove products from competing websites altogether.

Amazon’s goal is to insulate itself from price competition by preventing lower retail prices in the market at the expense of American consumers who are already struggling with a crisis of affordability.  

“Amazon doesn’t have cheap prices because of its good business sense. Amazon’s ‘cheap’ prices are the result of intimidation and illegality that drove up prices for consumers across the marketplace. My office has uncovered evidence that Amazon bullied vendors to hike up the price of their products sold at other shops, or secured the removal of these products altogether, to ensure Amazon was the cheapest place consumers could find products,” said Attorney General Bonta.

“In other words, while consumers face a crisis of affordability, Amazon blatantly worked to ensure that consumers could not find cheaper products out in the marketplace, all the while raking in unlawful profits from Americans who genuinely thought they were getting the best deal. Let me be clear: In California, we welcome competition and innovation. We welcome companies that succeed by offering better prices and better service. What we have here is a greedy, behemoth corporation intentionally increasing prices in the marketplace to get richer and richer off the backs of consumers who are struggling with affordability. While most of the evidence in our filing is redacted from the public, my office is working hard to ensure it comes to light. Amazon’s scheme is neither subtle nor complex. It is price fixing, plain and simple, black and white, and we’re asking the court to immediately halt this conduct while the underlying case proceeds. California looks forward to holding Amazon accountable at our January 2027 trial. Consumers and small businesses deserve justice.” 

When faced with a competitor offering a lower price, Amazon does not compete fairly. Instead, Amazon insulates itself from competition by strong-arming its vendors into raising prices offered by its competitors, sometimes with the explicit or implicit agreement of the competing retailer. These are not general discussions about price — these are explicit agreements to increase retail prices; all so Amazon can maintain its profit margins at the expense of consumers.  

The new evidence uncovered shows that Amazon’s agreements to raise prices are typically implemented using one or more of the three price fixing schemes below:

• When Amazon and a competitor are price-matching one another, resulting in a downward pressure on price, either Amazon or the competitor agrees, through their common vendor, to increase the retail price or make the product temporarily unavailable, so that the other retailer can match the increased market price, increasing the price for consumers. 
• A competitor offering a discounted price on a product will increase its retail price at Amazon’s request (a request made through the vendor), so that Amazon can then match the increased retail price, thereby increasing the price for consumers. 
• The vendor removes a product from a competing retailer who is offering a lower price than Amazon, so that the lower price is no longer available in the market and Amazon then raises its retail price, resulting in a higher price for consumers. 

As part of the motion for preliminary injunction, Attorney General Bonta asks the court to stop Amazon’s unlawful conduct including: engaging in explicit price fixing with its vendors and its competitors; communicating with vendors about other retailers’ pricing; and coercing its vendors to serve as the go-between with its competitors by demanding money to make Amazon whole for price matching a lower-priced retailer.  

BACKGROUND: 

Amazon is the dominant online retail store in the United States with close to 200 million Prime members nationwide. By its own account, Amazon is a driving retail force as 92% of consumers say they are more likely to buy products from Amazon than other e-commerce sites while 56% of consumers say they visit Amazon daily or at least a few times a week. Amazon continues to be the first place consumers look for product information, with 75% of consumers saying they check prices and product reviews on Amazon before making a purchase.

Because of this, Amazon is a must-have distribution channel for merchants. Indeed, more and more third-party sellers join Amazon every day, despite the fact that the total cost of selling on Amazon far exceeds that of selling in other online stores. As one seller put it, “We have nowhere else to go and Amazon knows it.” Another said, “There is no viable alternative to Amazon for my business.” 

Amazon has orchestrated the substantial market power it now enjoys through agreements at the retail and wholesale level that prevent effective price competition in the online retail marketplace. Merchants must agree not to offer lower prices elsewhere — including competing sites like Walmart, Target, eBay, and, in some cases, even on their own websites — and to accept drastic penalties like loss of the “Buy Box” on Amazon or to “compensate” Amazon if other online stores do lower their prices. Merchants that do not comply face sanctions such as less prominent listings and even the possibility of termination or suspension of their ability to sell on Amazon. Without basic price competition and different online sites trying to outdo each other with lower and lower prices, prices artificially stabilize at levels higher than would be the case in a competitive market. This occurs not because Amazon competed successfully or because it is a more efficient retailer and marketplace, but because Amazon is breaking the law. 

The Attorney General’s lawsuit seeks an order from the San Francisco Superior Court that stops Amazon’s anticompetitive behavior and recovers the damages to California consumers and the California economy. The trial is expected to start next January.