District of Columbia Attorney General Karl Racine sued Amazon on Tuesday for allegedly violating antitrust law by preventing vendors on its platform from charging cheaper prices on other sites.
“We filed this antitrust lawsuit to put an end to Amazon’s illegal control of prices across the online retail market,” Racine tweeted Tuesday morning. “We need a fair online marketplace that expands options available to District residents and promotes competition, innovation, and choice.”
He elaborated that Amazon uses restrictive contract terms to control online retail prices throughout the web.
“Amazon requires third-party sellers to agree that they won’t offer their products anywhere else online -- including their own websites -- for a lower price than on Amazon,” he wrote in a Twitter post.
Amazon said two years ago that it had stopped including a clause in its contracts that prohibited third-party vendors from charging lower prices elsewhere on the web.
But Racine alleges that Amazon merely replaced that contractual prohibition with an effectively identical clause -- the “fair pricing policy” -- which allows the company to expel vendors that offer cheaper prices on other sites.
“Far from enabling consumers to obtain the best products at the lowest prices, Amazon instead causes prices across the entire online retail sales market to be artificially inflated, both for products sold on Amazon’s online retail sales platform and on its competitors’ online retail sales platforms,” he alleges in a complaint filed in the District of Columbia Superior Court.
The complaint claims that Amazon's restrictive terms suppress competition from other online platforms -- like eBay -- as well as from the retailers' own sites.
Amazon's terms “artificially raised the price of goods to consumers,” because third-party sellers had to “incorporate Amazon’s high fees and costs into their product prices not only when selling on Amazon, but also when selling across the entire online retail sales market,” the complaint alleges.
An Amazon spokesperson said Tuesday that Racine “has it exactly backwards.”
“Sellers set their own prices for the products they offer in our store,” the spokesperson said. “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.”
Advocacy group Public Knowledge cheered news of the lawsuit.
“Consumers are paying more than they should for what they buy online as a direct result of Amazon’s conduct, policy counsel Alex Petros stated. “Third-party sellers should be allowed to contract freely with platforms that offer them the best deal to reach customers -- not limited by Amazon’s self-enriching terms.”
The lawsuit comes as the largest tech companies are facing increasing scrutiny by policymakers. Last year, federal and state officials brought separate antitrust lawsuits against Google and Facebook.
A staff report issued last year by Democrats on the House Judiciary antitrust subcommittee said that Amazon has “significant and durable market power in the U.S. online retail market.”
The authors said their research showed that Amazon has “monopoly power over most third-party sellers and many of its suppliers.”