Amazon is facing a new legal hurdle with a lawsuit accusing the company of breaking its promises not to retaliate against third-party sellers.
California Attorney General Rob Bonta is leading a suit against Amazon, accusing the company of continuing to punish sellers that offer lower prices on competing online stores — such as eBay and Walmart — despite ending its Price Parity Provision in 2019.
In newly redacted documents, Bonta makes the case that Amazon ended the policy in name only, but continued its modus operandi. In fact, the company even planned to expand the penalties.
Here are some of the pertinent examples of Amazon’s behavior, as revealed in the documents the AG released (emphasis theirs):
5. But despite removing that language, Amazon continued to interpret and apply other provisions of its BSA to mandate the same price parity agreement from third-party sellers. As an internal Amazon document put it, despite “the recent removal of the price parity clause in our BSA . . . our expectations and policies have not changed.”
14. [I]nternal Amazon documents confirm that just months after Amazon eliminated the Price Parity Provision from its BSA, Amazon planned an expansion of the penalties for lower prices off Amazon. An Amazon Director observed that these expanded penalties “may generate pushback given recent positive press about our change to remove the previous price parity clause which required 3P [third-party] Sellers to price their products on Amazon lower than they price them anywhere else.” In other words, Amazon claimed to antitrust enforcers that it was no longer enforcing price parity, but it continued to do just that. Amazon even anticipated that “media and selling partners may claim the removal of the clause was not only trivial but a trick and an attempt to garner goodwill with policymakers amid increasing competition concerns.”
According to the AG’s documents, Amazon’s measures appear to have had the desired effect on sellers, with many of them living in fear of doing anything that could negatively impact their standing with the company:
68. One seller reported to Amazon, “I still wake up in fear every day that my account or a key ASIN [Amazon Standard Identification Number] could be suspended.” Amazon admits in internal documents that “Sellers live in constant fear that their accounts will be suspended, or that top selling products will be removed, putting their businesses and livelihoods at risk.”
The documents also show the policy had widespread support within Amazon, with the company’s VP of Pricing encouraging veiled threats:
163. [I]n January 2019, a Marketplace seller complained to Amazon, “the problem is that we’re being asked to take our prices down [on Amazon] to match our own [website] store.” Amazon’s VP of Pricing reminded the seller’s account manager that it could be unsuppressed if the price on the other website changed, and the seller should “control prices across all his channels. . . . [Y]ou might want to ask him to check if his sales on other sites directly or through distributors is putting him and us at a relative competitive disadvantage. . . . He might get the hint. :)”. The hint was straightforward: raise your prices elsewhere if you want to make sales on Amazon.
Despite a similar lawsuit from the Washington D.C. District Attorney being dismissed in 2021, the California AG may just have the goods to force Amazon to stop price-fixing.
“As California families struggle to make ends meet, we’re in court to stop Amazon from engaging in anticompetitive practices that keep prices artificially high and stifle competition,” said Attorney General Bonta. “There is no shortage of evidence showing that the ‘Everything store’ is costing consumers more for just about everything. Amazon coerces merchants into agreements that keep prices artificially high, knowing full well that they can’t afford to say no. With other e-commerce platforms unable to compete on price, consumers turn to Amazon as a one-stop shop for all their purchases. This perpetuates Amazon’s market dominance, allowing the company to make increasingly untenable demands on its merchants and costing consumers more at checkout across California. We won’t stand by while Amazon uses coercive contracting practices to dominate the market at the expense of California consumers, small business owners, and the economy.”