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Washington, D.C., attorney general heads to battle over Amazon’s competitive practices

The lawsuit challenges the company’s use of “most favored nation” price agreements.

Washington, D.C., attorney general heads to battle over Amazon’s competitive practices
[Photo: Lawrence Glass/iStock]
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After months of tense congressional hearings, which saw senators and representatives grill tech giants about potentially monopolistic actions, Washington, D.C., is now heading for battle with $1.6 trillion behemoth Amazon over alleged anticompetitive pricing tactics.

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D.C. Attorney General Karl Racine said Tuesday he was filing an antitrust lawsuit against the e-retailer, claiming the company’s practices have unfairly inflated costs for customers while snuffing out innovation from competitors on the market. The lawsuit focuses on Amazon’s use of “most favored nation” agreements, which prevent third-party sellers on Amazon’s website from listing their products for a lower price anywhere else, including the seller’s own website. Thus, sellers are effectively forced to incorporate Amazon’s hefty fees—which can be as much as 40% of an item’s price tag—into the baseline price of the item, mapping “an artificially high price floor across the online retail marketplace.”

The allegedly illegal price agreements have let Amazon build monopoly power over the market, which violates D.C.’s Antitrust Act, the lawsuit argues. It’s seeking to end the agreements, recover damages, and apply penalties to deter future misconduct. It’s also asking the court to consider structural remedies, which restore competition often by breaking up monopolistic conglomerates. As the world’s largest online retailer, Amazon currently controls 50% to 70% of market sales.

In a statement, an Amazon representative countered, “The DC 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 not to highlight offers to customers that are not priced competitively. The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”

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It’s not the first time Amazon’s negotiations with its army of 2 million sellers have drawn the magnifying glass. In 2019, Amazon removed a similar price clause, then referred to as the “price parity provision,” from its contracts after high-profile criticism from Democratic senators Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut. However, the clause was quietly replaced by a near-replica, according to the lawsuit, rebranded as the “fair pricing policy,” which lets Amazon “impose sanctions” for sellers who offer lower prices elsewhere.

The lawsuit is the sixth in a line of trust-busting cases in the past year, which included a suit by the U.S. Labor Department and several states challenging Google in 2020, for allegedly leveraging its dominance among internet search engines to boost its other ventures, and suits from the Federal Trade Commission and states against Facebook, seeking to nullify its blockbuster acquisitions of Instagram and WhatsApp.

The stock market appears relatively unfazed: As of midday Tuesday, Amazon shares lost just $5 off a previous value of $3,245—a less than 0.2% difference.