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California sues Amazon over antitrust concerns

Amazon of Southern California on Wednesday, alleging the company caused higher prices across the state and “stifled competition.”

Amazon penalizes sellers on its site if they offer products elsewhere for less prices, the state argued. That makes it harder for others to compete and thus entrenches Amazon’s market power, the state said in a news release announcing the lawsuit.

DC Attorney General Files Antitrust Lawsuit Against Amazon

“For years, California consumers have paid more for their online purchases due to Amazon’s anti-competitive hiring practices,” State Attorney General Rob Bonta (D) said in a statement.

Amazon did not immediately respond to a request for comment. Amazon founder Jeff Bezos owns The Washington Post.

The lawsuit comes as regulators in Washington, the states and Europe increasingly take aim at the power and influence of the biggest tech companies.

Some of these efforts have faced roadblocks in court, including a very similar lawsuit brought by DC Attorney General Karl A. Racine (D) last year. That lawsuit was dismissed by a judge this year, but Racine in August filed a notice that he would appeal the decision.

The California lawsuit could herald antitrust challenges against Amazon in Washington. The Federal Trade Commission has been investigating the company for years, and its president, Lina Khan, is expected to take action against the company, after years of criticizing its alleged monopolistic practices as a member of the academic and congressional staff.

After months of stagnation, Lina Khan breaks loose

Amazon’s behavior has also come under scrutiny on Capitol Hill, where a bipartisan coalition of lawmakers has introduced bills targeting how the company treats outside sellers. Amazon, other tech companies and their surrogates have mounted an extensive lobbying campaign calling for the legislation to be brought back.

The California lawsuit alleges that Amazon’s actions have harmed consumers and the state’s economy. The complaint alleges that Amazon previously misled other regulators who analyzed its effect on prices.

“Amazon makes consumers think they are getting the lowest prices possible, when in fact they cannot get the low prices that would prevail in a free market because Amazon has coerced and induced its third-party sellers and wholesale suppliers to engage in practices anticompetitive. price agreements,” the lawsuit alleges.

The lawsuit concerns contracts Amazon signs with third-party merchants who sell items on its site. These agreements, the suit says, prohibit sellers from listing items for less on competing sites like Walmart, Target, or even on their own websites.

“Amazon has misled consumers into believing they are getting the low prices that would prevail in a competitive market when, in fact, it has deliberately caused prices to be generally higher everywhere else than they would be without price parity. ”, alleges the complaint.

These types of contracts are not inherently anticompetitive, said Herb Hovenkamp, ​​a professor of antitrust at the University of Pennsylvania Carey School of Law and at Wharton. But in this case it could be, he said.

“They want to maximize business on their own platform by making sure other companies don’t get a better deal than theirs,” Hovenkamp said.

European Union fines Amazon for data

Amazon’s third-party seller business is a major moneymaker for the company, generating $27.4 billion in revenue last quarter alone. Third-party sellers have long accounted for more than half of all items sold on Amazon.

The complaint also paints a detailed portrait of the ways Amazon wields power over sellers, which could have implications for other antitrust cases involving the company’s online marketplace.

Amazon sellers rely heavily on the revenue they earn from people who buy their products on the platform, according to the complaint. About half of Amazon’s third-party sellers generate 80 percent to 100 percent of their revenue from the company’s marketplace, the complaint says.

“We are stuck. We have no choice but to sell through Amazon,” one merchant told investigators.

Amazon is far from the only tech giant facing antitrust lawsuits. The FTC has a lawsuit pending against Facebook, and the Justice Department sued Google over monopoly concerns in 2020.

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