What just happened?
After the lawsuits against Google and Facebook for their anti-competitive behaviour, next in line was the lawsuit against Amazon filed by the D.C. Attorney General, Karl A. Racine on 25 May 2021.[1] The suit alleges that Amazon was in violation of antitrust law by restricting third party sellers from selling their products to any other online platform than Amazon on lower prices or better terms.[2]
What does this mean?
The Office of the Attorney General (OAG) alleged that the aforementioned violation stemmed from the “most favored nation” (MFN) agreements signed by third party sellers and were aimed to build and retain Amazon’s dominant position in the online marketplace.[3] The said agreements also sneakily required third party sellers to include upto 40% of total product price as fees to Amazon that ultimately let the consumers bear the brunt as they ended up paying very high prices for products bought on Amazon.[4]
It is interesting to note that Amazon claimed to remove its price parity policy in 2019 only to cleverly replace it with an almost identical substitute, Fair Pricing Policy.[5] While in the price parity policy, the third party sellers were prohibited explicitly from offering their products at a lower price or better terms at any competing online retail sales platform, including its own website; the Fair Pricing policy allowed Amazon to sanction or remove the third party sellers if they offer their products to other platforms for better terms or lower price.[6]
As unfair as these terms of contract are for third party sellers, they are equally, if not more, disadvantageous to the consumers. The high fees and commission charged by Amazon from third party sellers on their products result in ‘artificially inflated prices’ for the consumers. Needless to say, in the absence of such severe restrictions, the products would be available to consumers at comparatively lower prices.[7]
The irony in Jack Evans statement can not be missed as he explained how “Amazon takes pride in the fact that they offer low prices across the broadest selection, and like any store they reserve the right not to highlight offers to customers that are not priced competitively.”[8]
Such anti-competitive practices by Amazon also result in stifling market competition as they practically devoid other online retail platforms of an opportunity to compete on price to win market share. Amazon is so fixated on retaining its monopoly that it has left no stone unturned in abusing its dominant power to do the same. More importantly, these practices make certain that consumers are deprived of their choice to make a decision to purchase any product on the basis of its price. It also results in lesser choices of products for the consumer on the online retail market. The grave downside of such anticompetitive practices is also that it would suppress innovation and reduce investment in potentially-competing platforms.[9]
What does this mean for the legal sector?
Although this case is brought against by one party in one state court in the US which means that if they win, the judgement would have effect only over D.C., it does give a glimmer of hope for a truly competitive e-commerce market. This pattern that the USA has seen in the last six months over challenging Google’s dominance in search and advertising; and Facebook’s violations of antitrust laws, is a testament to the determination to fiercely check these tech giants’ powers.[10] What is also remarkable in these instances is the extremely crucial role that attorney generals are playing to break the abuse of dominant power of such huge corporations one at a time, when the federal government has disappointed with its insignificant actions in the past years.
Written by Neha Singh
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References:
[1] Cat Zakrzewski and Rachel Lerman, “D.C. attorney general brings antitrust lawsuit against Amazon” (The Washington Post, 25 May 2021) <https://www.washingtonpost.com/technology/2021/05/25/dc-ag-antitrust/> accessed 29 May 2021
[2] Office of the Attorney General for the District of Columbia, ‘AG Racine Files Antitrust Lawsuit Against Amazon to End its Illegal Control of Prices Across Online Retail Market’ (25 May 2021) <https://oag.dc.gov/release/ag-racine-files-antitrust-lawsuit-against-amazon> accessed 29 May 2021
[3] ibid
[4] ‘District of Columbia accuses Amazon of unfair pricing strategies in new suit’ (Reuters, 25 May 2021) <https://www.reuters.com/technology/washington-dc-attorney-general-filing-antitrust-lawsuit-against-amazoncom-racine-2021-05-25/> accessed 30 May 2021
[5] OAG (n2)
[6] ibid
[7] ibid
[8] Zakrzewski (n1)
[9] ‘Amazon sued in first antitrust case against retail giant in US’ (LiveMint, 26 May 2021) <https://www.livemint.com/companies/news/amazon-sued-in-first-antitrust-case-against-retail-giant-in-us-11621986551856.html> accessed 30 May 2021
[10] Zakrzewski (n1)
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.