Amazon is in The Hot Seat, Again

This may sound very familiar, but it is, in fact, a new story.

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

The Playbook

For years, Amazon had an explicit policy that prohibited U.S. sellers from offering products at a lower price or better terms on competing platforms. Facing pressure from lawmakers, Amazon removed that policy in 2019, but D.C. Attorney General Karl Racine says Amazon’s anti-competitive policies are still very much in force:

  • Racine highlights Amazon’s 40% merchant fee, which sellers must pay for use of the platform.
  • That fee, coupled with a policy to only showcase products that aren’t offered for less elsewhere, means Amazon effectively “controls pricing across the online retail sales market,” according to Racine.

Amazon takes a different view. “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.”

Amazon went even further in its rebuttal: “The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”

The Bottom Line: The rubber hits the road when framed like so — if a seller wanted to offer a product on Walmart’s website for a lower price, because Walmart took a lower cut of the sale, that seller would effectively be banned from doing (if they wanted to remain in the good graces of Bezos).

“Walmart routinely fields requests from merchants to raise prices on Walmart’s online retail sales platform because the merchants worry that a lower price on Walmart will jeopardize their status on Amazon,” the lawsuit alleges. It’s tough out there.

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