Amazon Ordered to Face Antitrust Case Over Merchant Price Policy

Amazon.com Inc. lost its bid to end federal antitrust litigation in Seattle over claims that its “most favored nation” policies for merchants have driven up prices across the internet.

Judge Ricardo S. Martinez let most of the proposed consumer class action move forward Tuesday in the US District Court for the Western District of Washington. Though the case’s complex antitrust theories are novel, they’re legally plausible, the judge said.

“Plaintiffs’ allegations, although complicated, are not as complicated as Amazon would have it,” he wrote. “The fact that no court has ever found a policy like these to violate the Sherman Act does not, in itself, render these claims implausible.”

The ruling—coming a day after the Justice Department announced a potentially landmark lawsuit over Alphabet Inc.'s dominance of digital advertising markets—represents the latest in a growing wave of antitrust challenges confronting the tech sector in general and Amazon in particular.

The allegations echo several other cases facing Amazon, including enforcement suits brought by the attorneys general of California and Washington, D.C., and class actions targeting specific sectors, such as online sales of books and e-books. The Washington, D.C., case is on appeal after being thrown out in March 2022.

Amazon has also been accused of rigging its algorithms to penalize third-party sellers not using its shipping, logistics, and fulfillment services. Many of the same business practices, meanwhile, have drawn the attention of lawmakers bringing serious scrutiny to Silicon Valley for the first time in decades.

Amazon’s Defenses ‘Premature’

The decision Tuesday was the second by a federal judge in Seattle to tentatively embrace the idea that Amazon’s “fair pricing” policies toward sellers on its platform have inflated the online cost of virtually everything. Judge Richard A. Jones let a nearly identical case move forward in March 2022.

The other case, brought by a different group of consumers, claims the most favored nation clauses effectively force Amazon’s rivals to adopt its own unusually high fees for merchants. The suit before Martinez involves the subtly different theory that the same basic mechanisms let Amazon keep its own prices high by sparing it from competition.

In his ruling, Martinez acknowledged Amazon’s “intense and thorough legal arguments” against the idea that online sellers operate in a distinct market without meaningful competition from brick-and-mortar stores. But those arguments “are fact-based and premature,” he said.

The company is “essentially asking the court to hear expert testimony at the motion-to-dismiss stage of litigation,” the judge wrote. “That is not how civil litigation is supposed to proceed.”

He did, however, narrow the case, finding that the relationships among Amazon, its merchants, its rival platforms, and consumers are too complex to fit any legal theory alleging a per se antitrust violation. The pricing policies must be viewed in light of their actual effect on competition under all the circumstances, Martinez said.

Quinn Emanuel Urquhart & Sullivan LLP, Keller Rohrback LLP, and Milberg Coleman Bryson Phillips Grossman PLLC are counsel for the consumers. Amazon is represented by Davis Wright Tremaine LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP.

The case is De Coster v. Amazon.com Inc., W.D. Wash., No. 21-cv-693, 1/24/23.