Amazon Accused of Stifling Competition

According to the research firm Insider Intelligence, retail behemoth Amazon currently controls roughly 38% of online sales in the U.S., equivalent to more than that of eBay, Walmart, Apple, Target, and Best Buy put together. Accounting for 58% of these sales are products listed by the approximately 2 million sellers on Amazon’s third-party marketplace.

However, many of those 2 million sellers may be listing their products on Amazon more by necessity than by choice. In a lawsuit recently brought by the state of California, Amazon is being accused of using contract provisions to in effect bar sellers from offering lower prices for products on non-Amazon sites, including on the sellers’ own websites. That, in turn, harms the ability of other retailers to compete, according to the office of the California attorney general, Rob Bonta.

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California says Amazon has effectively violated the state’s antitrust laws by stifling competition and engaging in practices that push sellers to maintain higher prices on products on other sites in order to maintain their own ecommerce dominance.

“Amazon coerces merchants into agreements that keep prices artificially high, knowing full-well that they can’t afford to say no,” said Bonta in a statement.

The 84-page lawsuit, filed in San Francisco superior court, is reminiscent of another complaint filed last year by the District of Columbia. That lawsuit is now going through an appeals process after being dismissed by a district judge earlier this year.

Officials in California think their lawsuit will be successful, however, once information it collected during a more than two-year investigation involving subpoenas and interviews with sellers, Amazon’s competitors, and current and former employees at the company is taken into consideration.

In the suit, California alleges that Amazon applies various sanctions to merchants that do not comply with the above policy, such as removing their products from prominent listings on Amazon or suspending or terminating their seller accounts altogether.

The state’s primary goal with the lawsuit is to stop Amazon from entering into contracts with sellers that harm price competition. And while state officials did not say how much money they are seeking, they also want the court to compel Amazon to pay damages to the state for increased prices.

In the past, Amazon has claimed that it allows sellers to set their own prices on the platform. However, It has also declared that it is entirely within its rights to not highlight products that it believes are not competitively priced.