Why Amazon Is In Deep Trouble With California
California is targeting Amazon for its anticompetitive practices relating to how it controls what its third-party merchants sell on other platforms.
This article is more than 2 years old
The American multinational technology giant Amazon is being sued by the state of California for antitrust violations, and Amazon’s long-established practice of prohibiting any price competition. According to California Attorney General Rob Bonta, Amazon is in violation of California’s Unfair Competition Law and the Cartwright Act. This means Amazon is being accused of requiring merchants to enter into agreements that severely penalize them if their products are offered for a lower price than what is listed on Amazon.
Vice has provided all the juicy details regarding the state of California and its suit against Amazon, reporting that the state is alleging Amazon restrained its competition and knowingly caused prices to increase across California through anti-competitive practices, which is against the law. According to the lawsuit filed by California Attorney General Rob Bonta, the agreements set in place between merchants and Amazon are limiting the ability of any other online retailer to compete with the aggressive lead and control Amazon is taking within the online retail marketplace.
The lawsuit revolves around a state of affairs that has been openly allowed for years. This is because Amazon allegedly forces merchants, unbeknownst to them, who use the wildly popular online shopping platform into entering agreements that either prohibit or severely punish them from offering their products at lower prices through other merchants. The press release says merchants who don’t do this face sanctions such as less prominent listings and even the possibility of termination or suspension of their ability to sell on Amazon.
Due to Amazon’s stance and market dominance, many merchants cannot survive unless they sell on Amazon. The end result is merchants have to sell their products everywhere for a price that reflects the company’s inflated fees. Consequently, other retailers cannot make ends meet with Amazon by offering lower listing fees.
“The reality is many of the products we buy online would be cheaper if market forces were left unconstrained,” Bonta explained in a statement on why the lawsuit was not only necessary but justified. “With today’s lawsuit, we’re fighting back. We won’t allow Amazon to bend the market to its will at the expense of California consumers, small business owners, and a fair and competitive economy.”
The state of California is requesting the courts prohibit the e-commerce giant from entering into any agreements in the future. It is also aiming to force Amazon to immediately notify merchants that it no longer requires them to sell for the same cost on all platforms.
Moreover, the state wants to appoint a regulator to make sure the e-commerce giant willingly complies with the rulings. In addition to ordering any deemed rewards and damages, and ordering the company to return its ill-gotten gains and pay penalties to serve as a deterrent to other companies contemplating similar actions. Plain and simple, Amazon cannot be allowed to continue these practices for the sake of merchants looking to succeed.
A spokesman for the company stated “Similar to the D.C. Attorney General whose complaint was dismissed by the courts – the California Attorney General has it exactly backward. Sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection and like any store we reserve the right to not highlight offers to customers that are not priced competitively.
