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California Files Antitrust Lawsuit Against Amazon

The California Attorney General filed an antitrust lawsuit against Amazon on Wednesday, alleging the retailer is stifling competition and raising the prices consumers pay over the Internet.

The suit is limited to California, where officials said Amazon had about 25 million customers, but if it succeeds, it could have a broad impact across the country.

The lawsuit focuses largely on how Amazon penalizes sellers for offering products at lower prices on other websites. When Amazon sees a product offered for less on a competitor’s website, it often removes important buttons such as “Buy Now” and “Add to Cart” from a product listing page.

Those buttons are a major sales engine for businesses that sell through Amazon, and losing them can quickly hurt their business.

That creates a dilemma for marketplace sellers. Sometimes they may offer products at lower prices on sites other than Amazon as the cost of using those sites may be lower. But because Amazon is by far the largest online retailer, sellers would rather raise their prices on other sites than risk losing their sales on Amazon, the complaint says. saidciting interviews with vendors, competitors and industry advisors.

“Without base price competition, without different online sites trying to outdo each other with lower prices, prices artificially stabilize at a higher level than they would in a competitive market,” the complaint reads.

The California suit is the latest in a series of increasingly aggressive efforts by states and regulators in Washington and Europe to curb the influence of the largest companies in the tech industry. Also on Wednesday, a European Union court gave its blessing to a record billion-dollar fine issued against Google in 2018.

The lawsuit filed by California Attorney General Rob Bonta mirrors a case filed by District of Columbia Attorney General Karl A. Racine, which was dismissed this spring. Judge Hiram E. Puig-Lugo of the Superior Court of the District of Columbia found that Mr. Racine had not provided sufficient evidence that Amazon’s policies were anticompetitive. Mr Racine is appealing the ruling.

Amazon has argued that sellers have control over prices and that including a seller’s offer in the so-called “Buy Box” amounts to an endorsement of a good deal for customers, so it wouldn’t contain an offer if it wasn’t competitively priced. . It has also argued that online sales are still a small part of the wider retail market.

The majority of Amazon’s sales — 57 percent of units last quarter — are made up of products offered by third-party sellers on Amazon’s website. They pay Amazon a referral fee to list their products and often pay for Amazon’s fulfillment services, ads, and other offerings. Amazon has collected more than $100 billion in third-party service fees in the past 12 months, according to its… financial statements.

California has been investigating Amazon for more than two years and the complaint, filed in the San Francisco Superior Court, alleges the practices violate California’s Unfair Competition Act and the Cartwright Act, the state’s principal antitrust law. It called for solutions, including ending the anti-competitive behavior and paying fines.

An official in Mr. Bonta’s office said the California attorney general expected to succeed where DC has stumbled by providing much more detail about how Amazon hurt consumers, and because California state law provides stronger consumer protections.

According to the complaint, Amazon was able to charge sellers more than competitors because it takes in so much of its online sales. Rising costs for sellers include fulfillment and paying for advertising, which sellers increasingly see as a necessity to succeed. The complaint heavily cites internal Amazon documents that were redacted.

The result was a “anti-competitive cycle,” according to the complaint, with sellers having to raise prices on Amazon to recoup their costs. But because of Amazon’s pricing policies, sellers must have higher prices on other sites, and “other online stores can’t effectively pull consumers away from Amazon with lower prices.”

Mr Bonta’s complaint cited emails between a brand of personal care electronics and another retailer asking the retailer to raise the prices of a discounted item because Amazon suppressed their listing. The brand wanted to “remove all deals and inventory up to Q1 as this has happened several times and is causing a major disruption to the Amazon business,” it wrote. “We simply can’t afford to cancel the buy box on Amazon anymore.”

According to the complaint, the seller no longer supplied products to the competitor.

The lawsuit in California comes as the Federal Trade Commission, led by Amazon critic Lina Khan, is investigating whether the company has violated antitrust laws. The agency is also investigating the process by which consumers purchase or cancel an Amazon Prime membership, which: some say can be intentionally confusing.

Amazon has attacked the FTC several times during the investigations. Last year it said Ms Khan, who wrote: breakout law review criticism of the Company’s power, must refrain from antitrust investigations into the Company.

Last month, Amazon moved to stop the agency’s requests to interview Amazon founder Jeff Bezos and its chief executive, Andy Jassy, ​​in the Prime investigation, because the requests were “calculated to serve no purpose other than Amazon’s top executives harass and disrupt business operations.”

Washington lawmakers also have Amazon in their sights. The company has fought aggressively against a bipartisan antitrust law that would prevent Amazon from favoring its own products in its online store. The proposed law has yet to be passed and the odds could diminish further if lawmakers turn their attention to the midterm elections.

In other cases, the company has been more diplomatic. Faced with an investigation into its retail practices in Europe, the company proposed a series of changes, including limiting the data it collects from rival merchants and allowing them to sell to Prime customers without using Amazon’s logistics program. .