California Attorney General Rob Bonta claims that information from a 2022 lawsuit still in process is evidence that Amazon illegally drives up prices for consumers.
Rather than working directly with competitors, the state argues that Amazon puts pressure on its vendors to convince their other large retailers to raise their prices. That would make room for Amazon to increase its prices and profits.
Historically, companies employ price fixing by working with competitors to set price levels that benefit them all and eliminate price
Last week, Bonta’s office publicly released redacted evidence claiming to be details of how Amazon specifically acted in multiple examples.
They wrote that “Amazon insulates itself from competition by strong-arming its vendors into raising prices offered by its competitors, often with the explicit or implicit agreement of the competing retailer.” Instead of discussing prices in general, they set “explicit agreements to increase retail prices, all so Amazon can maintain its profit margins at the expense of consumers.”
There are three mechanisms Amazon allegedly uses:
- Breaking a price match by increasing the retail price or making the product temporarily unavailable so the other retailer can match the now-higher price.
- A competitor with a discounted price lower than Amazon’s increases its price to accommodate a request Amazon makes through a vendor so Amazon can match the higher price.
- Amazon pressures a vendor to make its product unavailable to a retail competitor so the lower price is no longer available, after which Amazon raises its price.
The materials mention at least 21 supposed examples and well-known vendors and retailers.
Amazon did not reply to a request for a response before publication time, but they did provide one to a number of outlets like The Verge: “The Attorney General’s motion is a transparent attempt to distract from the weakness of its case, coming more than three years after filing its complaint and based on supposedly ‘new’ evidence it has had for years. Amazon is consistently identified as America’s lowest-priced online retailer, and we’re proud of the low prices customers find when shopping in our store. Amazon looks forward to responding in court at the appropriate time.”
That isn’t an actual denial by Amazon of any of the claims.
A separate request to the AG’s office, asking when the examples were filed and why they were kept private and only released last week, has yet to result in a response.
The suit also claims that Amazon “urges its employees to speak over the phone when discussing pricing and identifying which other retailers Amazon is price-matching.” A phone conversation is not something that produces a written record of a request to change prices, which discovery during the lawsuit would uncover.
The use of telephone conversations could mean the alleged practice is far more widespread without concrete evidence.
Should Amazon or the California AG’s office respond, I’ll update appropriately.
Also important to remember is that this is a lawsuit under California law and in the state’s courts, not a federal action.
The AG’s office seeks multiple court constraints on Amazon from the court:
- “Prohibit Amazon from entering into and enforcing its anticompetitive contracts that harm price competition;
- Require Amazon to affirmatively notify vendors that it does not require sellers to offer prices on par with off-Amazon prices;
- Appoint a Court-approved monitor, to ensure Amazon’s compliance with the Court’s order;
- Order damages to compensate for the harms to consumers through increased prices; and
- Order Amazon to return its ill-gotten gains and pay penalties to serve as a deterrent to other companies contemplating similar actions.”
Read the full article here