Amazon Has Stranglehold on Online Retail Market, Says DC – Courthouse News Service
An antitrust complaint filed by the District of Columbia attorney general says the retail giant’s online marketplace places restrictions on sellers that drive up consumer prices.
WASHINGTON (CN) – Online retailer Amazon has crushed its competition by instituting a policy that can remove sellers from the platform if they offer cheaper products on another website, according to a complaint filed by the attorney general of the national capital.
Antitrust lawsuit filed Tuesday in the District of Columbia Superior Court says that until 2019, business owners were required to sign an agreement with Amazon prohibiting third-party sellers from selling products on another platform at a price inferior. After coming under scrutiny by the government, the complaint says that this provision of the price parity contract was later replaced with a “effectively identical substitute” called the fair price policy – which includes the ban third-party sellers in the Amazon Marketplace if they have a better deal elsewhere.
In one declarationDC Attorney General Karl A. Racine said, “Amazon has used its dominance in the online retail market to win at all costs.”
“It maximizes its profits to the detriment of third-party sellers and consumers, while harming competition, stifling innovation and illegally tilting the playing field in its favor,” Racine said. “We have filed this antitrust lawsuit to end Amazon’s illegal price control in the online retail market. We need a fair online marketplace that expands the options available to district residents and fosters competition, innovation and choice. “
An Amazon representative did not immediately respond to a request for comment.
Kicking third-party sellers from the Amazon online marketplace may have detrimental effects on those businesses, the lawsuit says, but the practice is only compounded by mandatory fees and charges. Some of those fees can be up to 40% of the total price of products from third-party sellers, the complaint says, which is then passed on to consumers through Amazon’s platform and all other online retailers.
“The anti-competitive effects of Amazon’s conduct go beyond higher prices for consumers,” the lawsuit says. “In addition to artificially inflating prices in the online retail market, Amazon’s actions have reduced consumer choice and [third-party sellers] in the online retail market, removing innovation and reducing investment in potentially competing online retail platforms. “
Racine’s complaint seeks to ban Amazon’s restrictions on third-party sellers in addition to restitution for aggrieved consumers and civil penalties against the retail giant.
When third-party sellers want to offer products on the Amazon website, they can pay a per-sale fee of around $ 0.99 or a monthly fee of $ 39.99. Then, retailers decide whether Amazon should handle shipping, collection of payments, and other administrative costs.
But Amazon has dramatically increased third-party sellers’ fees over the past five years, according to the lawsuit. He reportedly added an additional 11% reduction in sales from third-party sellers who, in addition to other fees, pay the multibillion-dollar company a total commission of 45%.
“In contrast, Amazon’s competitors in the online retail market charge much lower fees and costs to sellers to sell on their platforms,” the complaint states. “For example, Walmart doesn’t charge any setup, subscription or registration fees, just a referral fee for each sale. [Third-party sellers] who choose to use Walmart’s Fulfillment Services program are billed a fixed monthly storage and fulfillment / delivery fee that is significantly lower than what Amazon charges. “
Amazon controls 50 to 70 percent of the U.S. online retail market, up from 38 percent in 2016, according to the lawsuit. Highlighting an investigation by the House Judiciary’s antitrust subcommittee from 2019, the complaint notes that Congress has found Amazon’s retail dominance to be enduring.
“According to the House antitrust subcommittee, digital markets tend to be characterized by strong network effects, which makes them prone to concentration and monopolization,” the lawsuit says. “Since the value of an online retail platform to buyers and sellers increases as each of them uses the platform, new entrants to the market find it very difficult to gain ground against a large, well-established incumbent with hundreds of millions of buyers and sellers. “