Amazon Showdown Grinds on With First Antitrust Case in U.S.

Amazon.com Inc. was sued by the attorney general for Washington, D.C., for allegedly engaging in anticompetitive practices that have raised prices for consumers.

The antitrust lawsuit, the first to target Amazon in the U.S., opens a new front in the campaign against major U.S. tech companies and is the sixth such case filed in the last year by state and federal officials. Yet even with the prospect of more action on the way against the industry in general and Amazon in particular, the retailer’s shares recovered from a decline Tuesday on the news and rose on the day.

Attorney General Karl Racine filed the Amazon case on his own for the district, rather than teaming with states, which is a common practice for attorneys general. He said he didn’t know whether states would join and hasn’t coordinated with the Federal Trade Commission, which Bloomberg has reported is investigating Amazon to determine whether the e-commerce giant is using its market power to hurt competition. Moreover, investors understand that monopoly cases typically play out for years and can be difficult to win. The Justice Department case against Google isn’t scheduled for trial until 2023.

Racine said in an interview on Bloomberg TV that he talked with other attorneys general after filing the lawsuit and he would welcome states if they want to join.

“This is a D.C. case that D.C. attorneys and our counsel worked on for over a year,” he said. “We engaged with Amazon, tried as best we could to establish a cooperative relationship to gather documents and analyze the case. We felt like the case needed to be brought.”

WATCH: Washington D.C. Attorney General Karl Racine discusses the lawsuit filed against Amazon for antitrust violations.

(Source: Bloomberg)

In his complaint, the attorney general said Amazon’s policies governing third-party sellers prohibit them from offering products at lower prices on rival platforms, which has led to artificially high prices for consumers and let the company build monopoly power.

“Amazon is increasing its dominant stronghold on the market and illegally reducing the ability of other platforms to compete for market share,” said Racine, who has been floated as a potential nominee for chairman of the FTC.

The lawsuit focuses on so-called most favored nation agreements, which prevent third-party merchants from selling at a lower price somewhere else, including their own websites, Racine said. The agreements mean the fees Amazon charges to sellers are incorporated into the prices sellers charge on Amazon and on competing platforms online, Racine said.

“The D.C. Attorney General has it exactly backwards -- sellers set their own prices for the products they offer in our store,” a company spokesman said in an email. “Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively.”

Amazon said the outcome Racine is seeking in the case would force the company to post higher prices, “oddly going against core objectives of antitrust law.”

Amazon merchants and their consultants in 2019 told Bloomberg that Amazon’s practices forced them to raise prices on other sites such as Walmart Inc. If Amazon detected lower prices on other sites, it would bury their products in Amazon search results, where they got most of their sales. Some of the merchants were eager to grow their sales on other sites, but Amazon’s policies prevented them from offering lower prices elsewhere to lure shoppers away.

The antitrust lawsuit follows a flurry of investigations and lawsuits targeting America’s biggest technology companies. Facebook Inc. and Alphabet Inc.’s Google were sued by state and federal officials last year in monopoly cases, while a House investigation accused the two companies along with Amazon and Apple Inc. of abusing their dominance in digital markets.

More cases may be on the way. Bloomberg has reported that the attorneys general of California and New York have been investigating Amazon, in addition to the FTC, while the Justice Department has been probing Apple.

Racine said his office and states are also investigating other aspects of Amazon’s business.

“There are several other issues that attorneys general, like D.C., are looking at with respect to the platforms, including Amazon,” he said.

(Updates with Racine comments starting in the fourth paragraph)

--With assistance from Lauren Ellison and Emily Chang.

To contact the reporters on this story:
David McLaughlin in Washington at dmclaughlin9@bloomberg.net;
Spencer Soper in Seattle at ssoper@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Robin Ajello, Andrew Pollack

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