The Washington, D.C. attorney general expanded his lawsuit accusing Amazon.com Inc. of driving up prices - adding products that the online retail giant buys wholesale and sell directly to consumers.
Attorney General Karl Racine sued Amazon in May to ensure the company was charged with the first government antitrust lawsuit in the U.S. Racine said Amazon's rules for its hundreds of thousands of third-party sellers essentially prevent those sellers from listing their products for sale at a cheaper price on other sites, leading to artificially high prices.
Most items sold on Amazon are sold by such third parties. But Amazon also operates a big traditional retail business in which it buys or sells good directly from big consumers products companies and buys them at itself. In an updated complaint, Racine alleges that Amazon s conduct in that arena also encourages artificially high consumer prices.
Amazon s sales agreements with its wholesalers include a Minimum Margin Agreement in which wholesalers guarantee amazon a certain minimum profit. If Amazon sells the product for a price that nets less than the agreed-upon profit, the wholesaler must compensate Amazon for the difference, a cost which can lead to millions of dollars in payments to Amazon, the complaint says.
As a practical effect of this agreement, FPSs have an incentive to hold higher prices on other online marketplaces to ensure that Amazon does not drop its price based on lower prices elsewhere, the complaint said, referring to first-party sellers.
An Amazon spokesperson declined to comment on the latest complaint. In response to the original lawsuit, the company had said: The D.C. Attorney General has it exactly backwards - sellers set their own prices for the products they offer on our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any other merchant, we reserve the right to not highlight offers that are not competitively priced to customers. The relief a pleading for the AG would force Amazon to display higher prices for customers, almost evilly going against core objectives of antitrust law.