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Is Amazon pushing prices higher? Legal wars are waged to prove it

Black Friday is prime time for low prices, and Amazon usually plays a leading role. But regulators around the country are trying to prove that Amazon’s market power is driving online prices higher than they should.

In three court cases, Amazon is facing allegations that its policies and practices limit price competition on and off its platform. At the heart of the arguments is Amazon’s dominance over your online purchases. Antitrust regulators say this gives Amazon the power to set its own pricing rules in violation of antitrust laws.

If you’re a regular shopper, these protracted court battles leave a question mark over the prices you’ll pay during your holiday shopping and beyond.

Two complaints, one filed by the California attorney general and the other by the Washington DC attorney general, allege that Amazon’s market power helps keep prices high by penalizing third-party sellers who offer lower prices on products. websites outside of Amazon. Shoppers looking for bargains might find cheaper options on a brand’s website or in a competitor’s marketplace, they claim, if it weren’t for Amazon’s practices that prevent sellers from selling. offer lower prices.

The company appears to believe “it’s better for Amazon’s ‘customer experience’ that consumers don’t see lower prices on Amazon, whether or not they get the lowest prices possible,” California said. AG Rob Bonta.

A third case, filed in November, argues that Amazon and Apple have kept prices high for iPhones and other Apple devices. An allegedly illegal agreement limits the number of third-party sellers that can list Apple products on Amazon, according to the lawsuit, which limits price competition.

Amazon, according to the lawsuit, used the deal to transform “its Amazon Marketplace position from a peripheral seller of Apple iPhones and iPads into a dominant seller of the platform, while charging higher prices than those previously enjoyed by consumers”.

Amazon declined to comment on the lawsuit focused on Apple products, but the company said the California and DC attorney general’s claims were “exactly backwards” regarding the company’s impact on pricing. .

“Amazon prides itself on offering low prices on the widest selection, and like any store, we reserve the right not to push offers to customers that are not price competitive,” said Amazon spokesperson Curtis Eichelberger in a statement. “The relief sought by the AG would force Amazon to offer higher prices to customers, which would strangely defeat the fundamental purposes of antitrust law.”

Amazon is by far the largest e-commerce platform in the United States, and third-party sellers turn to Amazon by the millions to bring their products to you. Estimates of Amazon’s share of U.S. e-commerce range from more than 37% of all online shopping transactions to 70%, according to the DC Attorney General.

When it comes to pricing, Amazon’s critics tend to focus on what they see as predatory low pricing that puts smaller competitors out of business. But these price-fixing complaints touch another part of the picture, according to Barry Lynn, executive director of the Open Markets Institute.

“They show that Amazon is very commonly forcing consumers to pay more than necessary,” he said.

High costs for third-party sellers

Anti-monopoly advocates argue that Amazon is forcing prices up with the costs third-party sellers must pay to participate in its marketplace. Catering to online shoppers who expect to get their purchases quickly, many sellers also pay Amazon to store and ship their products through its massive logistics network. Beyond these costs, sellers must share a share of their sales with Amazon when customers purchase the products. Increasingly, sellers are also paying Amazon for ads that give their products higher placement in search results — the “sponsored” listings you see so often.

With all these costs, sellers might have good reason to charge more on Amazon than on a competing platform or on their own websites, competition advocates argue. But sellers don’t risk Amazon’s penalty.

In 2019, Amazon removed its explicit policy against lowering prices on other platforms, but sellers said they would see their offers disappear from the “Buy Box”, which is the part of Amazon listings that gives a price and invites buyers to “Buy Now”. This is the death knell for most ads, as shoppers almost never click through to see the same products for sale from other sellers.

Bonta said the practice violates California antitrust laws. District of Columbia AG Karl Racine also sued Amazon with a similar argument. Amazon argued in the case that its policies do not explicitly require sellers to maintain higher prices on other platforms, adding that Racine’s office failed to show with facts and examples. that companies refrained from offering discounts on Amazon’s marketplace.

A judge dismissed that case, and Racine’s office appealed the dismissal in August. The US Department of Justice also weighed in, telling the court that the dismissal contained errors that could prevent the federal government from enforcing antitrust law in the future. The California lawsuit is just getting started in state court.

Amazon excludes some third-party sellers

The most recent case — the one against Amazon and Apple, filed by law firm Hagens Berman on behalf of consumers — alleges the companies entered into an illegal agreement to weed out third-party competition. As a result, Apple ended up with fewer third-party sellers offering its products at a lower price on Amazon’s platform, the lawsuit claims, while Amazon secured a guaranteed discount on wholesale Apple products so that can sell them directly to buyers.

More than 600 third-party sellers offered Apple devices on Amazon before 2019, but only seven remained after the tech giants reached a settlement, according to the lawsuit. While Apple has a tightly controlled list of authorized sellers for its products, the lawsuit claims that other third-party sellers also obtain Apple products from wholesalers and are not legally prohibited from listing them online.

Amazon can kick sellers out of its marketplace for a variety of reasons, many of which are legitimate. For example, it removes sellers that Amazon finds in violation of its policies or when it discovers counterfeit product listings. Amazon also cooperates with brands to track counterfeit listings, which often leads to removal of products or sellers (and sometimes raids). This is something Amazon could potentially claim it was doing with Apple in this case.

Amazon declined to say whether infringement might have been a factor in removing third-party sellers listing Apple products. Apple and attorneys for Hagens Berman did not respond to a request for comment.

It can be difficult to prove that the more than 600 sellers offering iPhones and iPads on Amazon’s marketplace were all legit. It would be surprising if this high number of small businesses had access to Apple products at wholesale prices and were willing to sell them at very low prices, said Neil Saunders, retail analyst at GlobalData.

“Apple controls quite tightly how and where its products are distributed,” Saunders said. “It doesn’t sell to any random person who wants to sell them on Amazon.”

Nonetheless, Apple’s control over how its products are sold — and Amazon’s alleged help in limiting which companies can sell the devices — are exactly the issues that caught the attention of antitrust lawyers to begin with. The case is in its early stages and it will likely be months before a judge rules.

Read more: What to Know About Fake Reviews When Buying Amazon Deals


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