Washington Attorney General sues Amazon over unfair pricing strategies

AG Karl Racine alleges that Amazon is stifling innovation and restricting Marketplace sellers

Washington, D.C. Attorney General Karl Racine has filed a lawsuit against Amazon for anti-competitive practices. He's accused the company of abusing its power by requiring that third-party sellers save their best deals for Amazon - effectively barring them from offering better prices on other platforms.

The suit [pdf] alleges that Amazon fixes online retail prices through contracts applied to third-party sellers. These contracts create 'an artificially high price floor across the online retail marketplace,' and eventually harm both consumers and sellers by stifling innovation, competition and choice in the market.

Racine's suit asks the court to put a stop to Amazon's ability to harm competition like this in the future, through remedial measures including breaking up the company. It also seeks damages and fines to deter similar conduct in future.

"We filed this antitrust lawsuit to put an end to Amazon's illegal control of prices across the online retail market," Racine said in a conference call.

"We need a fair online marketplace that expands options available to [District of Columbia] residents and promotes competition, innovation and choice."

Racine said that Amazon controls between 50 per cent and 70 per cent of online market sales.

Amazon's Marketplace platform allows third-party sellers to list and sell their products on the site. However, the firm's pricing agreements with those independent sellers have long been contentious.

In 2019, Amazon quietly withdrew its 'price parity provision' clause, which prohibited sellers from offering their products at a lower price on a rival online marketplace. It later added a nearly identical clause in its Fair Pricing Policy, according to the new lawsuit.

The Fair Pricing Policy enables Amazon to deal with misleading listings or predatory pricing behaviours on its platform.

In a statement to CNBC, an Amazon spokesperson rejected Attorney General's accusations and claimed that sellers set their own prices for the products they offer on Amazon.

"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. The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law," the spokesperson added.

The lawsuit comes months after the US Federal Trade Commission and 48 state attorneys general filed similar actions against Facebook and Google.

Last year, Amazon was a focus of a House Judiciary Committee investigation into tech giants' market power, with lawmakers considering new legislation to restrict the firm.

Germany's antitrust watchdog, the Federal Cartel Office (Bundeskartellamt), also launched an investigation into Amazon over the alleged use of anti-competitive practices earlier this month.

If the investigation finds that the Amazon is exploiting its market dominance, the watchdog could use new laws to prohibit any antitrust practice at an initial stage.