Amazon has been accused of pressuring wholesalers into selling goods at inflated prices on rival marketplaces through anticompetitve agreements, thus unfairly cementing its market dominance.
The allegations were made in an amended antitrust complaint that was first filed in May by Washington DC’s Attorney General Karl Racine and widened this week.
In his updated lawsuit [PDF], Racine stated Amazon requires wholesalers, aka first-party sellers, to sign Minimum Margin Agreements before they supply goods to the web titan to sell on its marketplace. These agreements, it is said, set the minimum amount of profit Amazon expects to receive from reselling the items. The wholesalers must to make up the difference if Amazon fails to get the agreed minimum amount of margin from people’s purchases.
Crucially, the prices of these products for customers includes the fees and whatnot Amazon charges for listing the goods on its site.
And here’s the genius part. Wholesalers are thus effectively strong-armed into charging prices on other e-commerce platforms that match or are higher than the prices on Amazon – otherwise, if these other platforms undercut Amazon, and the web titan fails to make its agreed profit, the wholesalers will be left picking up the bill, the lawsuit, first reported by the Washington Post, alleged.
It gets especially messy if Amazon reduces its fees, runs special offers, or otherwise causes goods to be listed at prices lower than that on rival e-commerce sites, because then the wholesalers may end up owing millions of dollars if the margin isn’t high enough, it is claimed.
In other words, it’s in the interests of the first-party sellers (FPSs) to keep their prices up on other sites to avoid run foul of their profit agreements with Amazon, which may just be a little unfair, the lawsuit contended.
“Indeed, FPSs have raised their prices to competing online marketplaces to prompt the maintenance of higher prices on those marketplaces and even asked those marketplaces to raise prices to online consumers to avoid triggering Amazon’s minimum margin protection,” the amended suit claimed.
“These agreements reduce other online marketplaces’ ability to compete with Amazon by offering lower prices to consumers.”
All in all, the effects of the Minimum Margin Agreement are anticompetitive for businesses and inflate prices for customers, it claimed.
In the initial filing to the Superior Court of the District of Columbia, Racine alleged Amazon bans businesses known as third-party sellers from peddling their products for lower prices on competing e-commerce sites. The internet titan fines traders for trying to undercut Amazon, and they are required to pay fees and extra charges that can rack up to 40 per cent of the price tag of listed products, it is alleged.
Racine wants the US capital’s courts to force Amazon to end any anticompetitive policies, and to order it to pay fines and damages to shoppers under antitrust law.
In a statement, Racine said: “Amazon has continued to use its dominant position as an online marketplace to rig the system, leading to higher prices for consumers, and less competition among online marketplaces.”
Amazon, meanwhile, insisted “sellers set their own prices for the products they offer in our store,” and claimed the Attorney General’s claims were “exactly backwards.” ®