DC Attorney General Targets Amazon First Party Activity in Amended Antitrust Complaint

Washington, DC Attorney General Karl Racine expanded his antitrust complaint against Amazon on Monday, targeting the company’s relationships with wholesale suppliers.

Racine sued Amazon in May over allegations the company illegally maintained monopoly power through its pricing contracts with third-party sellers.

The amended complaint expands Racine’s original allegations to include what it claims to be the anti-competitive effects of Amazon’s deals with owner-sellers, also known as FPSs or wholesalers. The original complaint was about how Amazon’s contracts with third-party sellers (TPS), or those who sell on Amazon under their own brand, allegedly stifle competition.

The Washington Post first reported the news of Racine’s amended complaint.

Much of Amazon’s dominance in e-commerce has come from its third-party market. This service is made up of millions of independent merchants who rely on Amazon’s logistics and fulfillment services to get their goods to customers’ doors. Amazon also buys products wholesale from other companies, known as sellers or owner sellers, and then handles the selling process.

In the new case, Racine alleges that Amazon’s “minimum margin agreement” with owner sellers has the “practical effect” of causing those wholesalers to increase their prices for markets outside of Amazon.

Indeed, these agreements require the wholesaler to guarantee Amazon a minimum profit, according to the complaint, which means that the seller must make up the difference if he does not reach that margin. Racine alleges that owner sellers may be inclined to increase their prices elsewhere “to ensure that Amazon does not lower its prices because of lower prices elsewhere.”

“These deals reduce the ability of other online marketplaces to compete with Amazon by offering lower prices to consumers,” according to the complaint, which goes on to say that the practice “results in reduced competition between online marketplaces and higher prices. high for consumers “.

Vendors such as popular phone accessories maker PopSockets have previously highlighted Amazon’s aggressive pricing tactics as a persistent problem they face when selling their products in the company’s marketplace.

In a statement, Racine said Amazon used its dominance in e-commerce to “rig the system,” resulting in higher prices for consumers and less competition between online marketplaces. Racine said his office discovered Amazon’s “anti-competitive” deals with owner-sellers as he investigated his relationships with third-party sellers.

“I filed this antitrust lawsuit to defend consumers, hold Amazon accountable for its anti-competitive practices and protect competition,” Racine said in a statement. “We are continuing to do just that with this amended complaint which further adds to Amazon’s misconduct.”

Amazon spokesman Jack Evans directed CNBC to the company’s previous statement on Racine’s initial lawsuit.

“The DC Attorney General has it all upside down – vendors set their own prices for the products they offer in our store,” Evans said. “Amazon takes pride in the fact that we offer low prices on the widest selection and, like any store, we reserve the right not to highlight offers to customers whose prices are not competitive. The relief sought by the GA would force Amazon to offer higher prices to customers, strangely defeating the fundamental objectives of antitrust law. “

The company has previously argued that sellers set their own prices for products sold on Amazon and that it is within its rights not to show offers that are not priced competitively.

The amended complaint adds to Amazon’s growing antitrust scrutiny. In addition to Racine’s lawsuit, Amazon is also being questioned by the Federal Trade Commission about its business practices in retail and cloud computing, according to reports from several outlets.

There are also sweeping antitrust reforms that target big tech through Congress and the European Commission has focused on Amazon’s treatment of third-party sellers, alleging it is engaging in anti-competitive behavior.