AMZN Being Sued by DC Attorney General

[ExFlyBoy5]

Not too surprised with this development.

Washington, D.C. Attorney General Karl Racine announced Tuesday he’s suing Amazon on antitrust grounds, claiming the company’s practices have unfairly raised prices for consumers and suppressed innovation.

Racine is seeking to end Amazon’s allegedly illegal use of price agreements to edge out competition, recover damages and impose penalties to deter similar conduct. The lawsuit asks the court to stop Amazon’s ability to harm competition through a variety of remedies as needed, which could include structural relief, often referred to as a form of break-up.

https://www.cnbc.com/2021/05/25/dc-...ounds-alleges-it-illegally-raises-prices.html

 

[MichaelB]

Thread title changed to reflect the OP edit.

 

[ponyboy]

Sue happy country.

 

[travelover]

Sue happy country.

A boy named Sue.

 

[USGrant1962]

That's a good way to make sure there are no Amazon physical stores or distribution centers in DC. Bye bye Amazon Books Georgetown.

 

[OldShooter]

Guy probably has an election coming. Needs to grandstand a bit. Mouse that roared.

 

[Car-Guy]

Can't say I'm sorry to see this.... OTOH, in a strange twist and turn of events, I ended up making my fortune in large part due to the governments breaking up of a couple of MegaCorps.

 

[W2R]

I love Amazon, and order a lot from them. For me they are one of the most wonderful aspects of living in the computer age.

Still, they are a big business and like all huge businesses, I think they will push boundaries as far as they're allowed to push them in order to make money. That's to be expected, IMO. Therefore it's probably an extremely good thing for our country that they are being closely watched over and brought to court now and then, to keep things clean.

Whether they are guilty or innocent of these charges, this is a good turn of events IMO because it will strongly encourage them to toe the line.

All of the above is my opinion and applies to all huge companies. I don't know a single thing about Amazon and I have no reason to think they have done anything wrong.

 

[Gumby]

Sue happy country.

Monopolization or attempted monopolization in a trade or commerce is against federal antitrust law and most state antitrust laws. Lawsuits by state Attorneys General are an expected and normal means of enforcing those laws. They can seek damages for violations, as well as injunctive relief forbidding the conduct going forward, breaking up the company or otherwise curing the antitrust violation.

The Sherman Act of 1890 provides, in relevant part:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court. 15 U.S.C. Sec 2

Any attorney general of a State may bring a civil action in the name of such State, as parens patriae on behalf of natural persons residing in such State, in any district court of the United States having jurisdiction of the defendant, to secure monetary relief as provided in this section for injury sustained by such natural persons to their property by reason of any violation of sections 1 to 7 of this title. 15 U.S.C. Sec 15c(a)(1)

Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws, including sections 13, 14, 18, and 19 of this title, when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings, and upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue. 15 U.S.C. Sec 26

 

[OldShooter]

Monopolization or attempted monopolization in a trade or commerce is against federal antitrust law and most state antitrust laws. Lawsuits by state Attorneys General are an expected and normal means of enforcing those laws. ...

Unfortunately, they are also an expected and normal means of political grandstanding. From a very casual read of the news reports Amazon has apparently been telling their 3rd party sellers that they must agree not to offer the same goods at a lower price through other channels. I would do the same thing if I had a platform like Amazon, Target, Walmart, Sears, etc.

The problem is called "channel conflict" in the business and, with the internet, it goes on all the time. A closely related concept is "minimum retail prices" set and enforced by manufacturers. You want to sell my stuff, you'll sell it no lower than the price I set.

"If a manufacturer, on its own, adopts a policy regarding a desired level of prices, the law allows the manufacturer to deal only with retailers who agree to that policy. A manufacturer also may stop dealing with a retailer that does not follow its resale price policy. That is, a manufacturer can implement a dealer policy on a "take it or leave it" basis." -- FTC (https://www.ftc.gov/tips-advice/com...ws/dealings-supply-chain/manufacturer-imposed)

​

IANAL, but I fail to see that the sin attributed to Amazon is any different than a perfectly legal minimum resale price requirement. But it sure sounds evil in a press release from some inconsequential attorney mouse.

 

[jazz4cash]

I heard Kelly Evans on CNBC interview this guy. She appeared to artfully back him into a corner but her last question backfired on her. It reinforced his argument that sellers raise prices to sell through Amazon in the aggregate. I am actually very pro Amazon but I also believe huge companies need to be challenged on monopolistic behavior. I’m happy to let the courts decide if they’ve gone too far with the MFN pricing but I do worry about unintended consequences.

 

[Gumby]

..... I fail to see that the sin attributed to Amazon is any different than a perfectly legal minimum resale price requirement. But it sure sounds evil in a press release from some inconsequential attorney mouse.

My earlier comment was not meant to analyze the case against Amazon. I was merely pointing out that suits by attorneys general are how the antitrust laws are enforced.

However, since you mentioned it, resale price maintenance agreements are no longer per se illegal, meaning that the mere existence of one is all that need be proven to make the case. (Per se treatment is reserved now for price fixing, market allocation, bid rigging and group boycotts.) But that doesn't mean they are "perfectly legal". Instead, it means any case alleging an antitrust violation will be analyzed under the so-called "Rule of Reason", which looks at the state of competition in the relevant product and geographical market, the market power of the defendant in that market, existence of anticompetitive effects, and whether there are legitimate pro-competitive justifications for the agreement. In the right circumstances, a minimum resale price agreement may well constitute an unreasonable "restraint of trade" in violation of Section 1 of the Sherman Act. That's the section that reads

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.

and, again under the right circumstances, could be monopolization conduct under Section 2.

You may think it unlikely that AG Racine can make his case, but that ultimately will be for a court to decide.

 

[Markola]

Well, instead of worrying about Amazon we could all shop at Walmart. Low, low prices!

I’m now old enough to remember the book “The Walmart Effect” and how no other retailer would ever possibly ever be able to compete with them. Right. And I have a Target Red Card to go with my Chase Amazon Visa.

 

[Koolau]

Just another example of penalizing unequal outcomes. We're supposed to be equal opportunity. If what you do with that opportunity makes you richer or more successful than someone else, guess who's at fault. YMMV

 

[CaptTom]

I have no clue about the legal basis for this, but at face value it seems odd to suggest that Amazon is causing prices to go up.

In my experience, Amazon is more often than not the cheapest, or one of the cheapest, sources for just about anything, with the possible exception of very small, inexpensive items which cost more to ship than to stock locally.

I remember the days of "allow 4-6 weeks for delivery." I remember inflated shipping and "handling" charges.

I guess it's politically smart to attack any big corporation. I just don't see that Amazon has done anything to hurt the consumer. Unless they find something I'm totally missing, I hope the court sees it that way, too.

 

[cathy63]

Unfortunately, they are also an expected and normal means of political grandstanding. From a very casual read of the news reports Amazon has apparently been telling their 3rd party sellers that they must agree not to offer the same goods at a lower price through other channels. I would do the same thing if I had a platform like Amazon, Target, Walmart, Sears, etc.

The problem is called "channel conflict" in the business and, with the internet, it goes on all the time. A closely related concept is "minimum retail prices" set and enforced by manufacturers. You want to sell my stuff, you'll sell it no lower than the price I set.

"If a manufacturer, on its own, adopts a policy regarding a desired level of prices, the law allows the manufacturer to deal only with retailers who agree to that policy. A manufacturer also may stop dealing with a retailer that does not follow its resale price policy. That is, a manufacturer can implement a dealer policy on a "take it or leave it" basis." -- FTC (https://www.ftc.gov/tips-advice/com...ws/dealings-supply-chain/manufacturer-imposed)

​

IANAL, but I fail to see that the sin attributed to Amazon is any different than a perfectly legal minimum resale price requirement. But it sure sounds evil in a press release from some inconsequential attorney mouse.

The difference here is that one distribution channel is setting the minimum price for other distribution channels with whom they have no business relationship.

If I make a product and sell it on eBay and on my own website, I can charge different amounts on those two platforms. My own website's price can be cheaper because I don't have to pay eBay's fees. As soon as I decide I want to expand my market by selling on Amazon as well, then I have to follow Amazon's rules. They take a bigger cut of the sales price than other platforms do, and they may require me to use more expensive shipping options, so it costs more to sell there. They also say I can't charge less on any other online site than what I charge on Amazon.

The lawsuit says the result of these rules is that sellers have to jack up their prices on eBay and on their own sites (and on Etsy and any other site they sell on) in order to cover the expense of selling on Amazon. Hence, Amazon is using the size of its market to control pricing on other platforms which they do not own, such as eBay.

IANAL either, and I don't know how likely it is that this will be deemed an actual violation of the antitrust laws, but it's definitely something that Amazon sellers have been complaining about for years.

 

[OldShooter]

The difference here is that one distribution channel is setting the minimum price for other distribution channels with whom they have no business relationship. ... Amazon is using the size of its market to control pricing on other platforms which they do not own, such as eBay. ...

With full understanding of the fact that logic and the law are often incompatible I still don't see where this is different from setting minimum retail prices. If I am a manufacturer of a unique product that makes me a monopoly I guess, but it's still legal for me to set a minimum selling price and to cut off resellers who won't play by my rules. Amazon is not even a monopoly but they too are setting a minimum selling price. For very logical reasons they don't want their 3rd party vendors to be underselling the Amazon price on walmart.com, target.com, ebay.com etc. or even on the seller's own web site. If the seller doesn't like that, fine. He can sell on one of the other large internet platforms. If he really wants to sell on Amazon, he can voluntarily accept Amazon's Ts & Cs. Nobody is forcing him to do that. It's a tradeoff between Amazon's advantages for a seller and its disadvantages. Life is like that.

 

[ERD50]

With full understanding of the fact that logic and the law are often incompatible I still don't see where this is different from setting minimum retail prices. If I am a manufacturer of a unique product that makes me a monopoly I guess, but it's still legal for me to set a minimum selling price and to cut off resellers who won't play by my rules. Amazon is not even a monopoly but they too are setting a minimum selling price. For very logical reasons they don't want their 3rd party vendors to be underselling the Amazon price on walmart.com, target.com, ebay.com etc. or even on the seller's own web site. If the seller doesn't like that, fine. He can sell on one of the other large internet platforms. If he really wants to sell on Amazon, he can voluntarily accept Amazon's Ts & Cs. Nobody is forcing him to do that. It's a tradeoff between Amazon's advantages for a seller and its disadvantages. Life is like that.

I really appreciated cathy63's explanation. I'm a bit torn on this one.

As I see it (also IANAL), there is a difference from the mfg setting a minimum price. In this case, it sounds like doing business with Amazon, because of their higher costs of dealing with Amazon, forces sellers to raise prices across the board to Amazon's level.

Sure, the seller can decide not to deal with Amazon. But as a buyer, if I'm OK with say, ebay's or etsy's or Walmart's or Wayfair's protection, policies, shipping etc, then I should be able to buy from them without an Amazon premium (supposedly for premium service). This takes that choice away from me as a consumer.

When a mfg sets a minimum price, it applies to everyone. The buyer can go with the competition. But here, the competition isn't just the product, it is the retail outlet. Now, the retail outlets aren't in price/service competition, that's been flattened by Amazon.

But I can see Amazon's point also. If you want to do business with me (Amazon), I don't want you selling the same product cheaper somewhere else. That cuts into my business. Kind of like the old "look at something at the brick/mortar store, then buy it on-line cheaper" scenario.

But in the end, if the consumer appreciates Amazon's policies, shipping, protection, etc, then the consumer should be willing to pay a premium for that service. Having it available cheaper somewhere else shouldn't matter, the consumer will say, I don't mind paying a few % more to buy through Amazon, I value them as a supplier.

And I've done exactly that. I might find something a bit cheaper than Amazon, but for a few % I don't feel like dealing with an unknown. But someone else might, and maybe I would under certain circumstances. Amazon's policy would take that choice away from consumers in many cases. So it does seem like an anti-trust issue.

-ERD50

 

[USGrant1962]

The difference here is that one distribution channel is setting the minimum price for other distribution channels with whom they have no business relationship.

If I make a product and sell it on eBay and on my own website, I can charge different amounts on those two platforms. My own website's price can be cheaper because I don't have to pay eBay's fees. As soon as I decide I want to expand my market by selling on Amazon as well, then I have to follow Amazon's rules. They take a bigger cut of the sales price than other platforms do, and they may require me to use more expensive shipping options, so it costs more to sell there. They also say I can't charge less on any other online site than what I charge on Amazon.

The lawsuit says the result of these rules is that sellers have to jack up their prices on eBay and on their own sites (and on Etsy and any other site they sell on) in order to cover the expense of selling on Amazon. Hence, Amazon is using the size of its market to control pricing on other platforms which they do not own, such as eBay.

IANAL either, and I don't know how likely it is that this will be deemed an actual violation of the antitrust laws, but it's definitely something that Amazon sellers have been complaining about for years.

FWIW, the U.S. Government frequently requires "most favored nation" status in its contracts setting a minimum price (e.g., vendor cannot offer a lower price to other buyers). Perhaps DC should sue the USG?

 

[Gumby]

FWIW, the U.S. Government frequently requires "most favored nation" status in its contracts setting a minimum price (e.g., vendor cannot offer a lower price to other buyers). Perhaps DC should sue the USG?

The government can choose to do things that would otherwise violate the antitrust laws. It's called "state action immunity".

 

[ExFlyBoy5]

...
In my experience, Amazon is more often than not the cheapest, or one of the cheapest, sources for just about anything, with the possible exception of very small, inexpensive items which cost more to ship than to stock locally...

I have seen the opposite. If you aren't careful in the selections, you very often will pay more (and sometimes MUCH more) that what you might find on WM or another online or brick and mortar store.

 

[Qs Laptop]

Amazon seller here.

Unfortunately, they are also an expected and normal means of political grandstanding.

This is likely what is going on.

From a very casual read of the news reports Amazon has apparently been telling their 3rd party sellers that they must agree not to offer the same goods at a lower price through other channels.

Apparently it was a casual read (and not just by you, but others) because Amazon does not require sellers to refrain from selling the same products at a lower price through other channels.

Amazon will no longer require third-party sellers to price their products on Amazon lower than they price them anywhere else. It quietly eliminated a clause in its contracts today that critics have called anti-competitive.

Price parity agreements, or most-favored nations clauses (MFNs), were formerly used by Amazon in contracts with third-party sellers to ensure that people selling products on the platform did not sell the same products for cheaper on any other platform like eBay or Alibaba.
https://www.theverge.com/2019/3/11/...tive-pricing-agreements-3rd-party-sellers-end

What Amazon CAN do is control whether or not sellers on Amazon win the coveted Buy Box. The Buy Box is the white box in the right-hand column, upper corner, of the product listing page that shows the price and has the "Add to Cart" and "Buy Now" buttons. Being the seller listed in the Amazon Buy Box is golden.

Most people are not aware there are other sellers for the same product. These other sellers are accessed by clicking on a link in a small box underneath the Buy Box. Or there might be a message from Amazon, "This product available from other sellers, potentially without Prime shipping", and then a clickable link. Clicking here will bring you to another secondary product listing page. Being listed here is like a death sentence.

So, if Amazon wants to punish a seller for selling the same product at a lower price on another platform they can do that by denying them possession of the Buy Box.

 

[jazz4cash]

If I am a manufacturer of a unique product that makes me a monopoly I guess, but it's still legal for me to set a minimum selling price and to cut off resellers who won't play by my rules.

That’s exactly the position I was in at megacorp and it was gospel that we as mfr could not set retail prices. In fact we were sued a few times but we always won because we charged everyone the same wholesale price and stayed away from setting retail prices. There are of course loopholes based on various details like volume, exclusivity, supply agreements etc but that does not set a minimum retail price.

 

[OldShooter]

I have seen the opposite. If you aren't careful in the selections, you very often will pay more (and sometimes MUCH more) that what you might find on WM or another online or brick and mortar store.

Yes. You have to be careful. Generalizing without data I don't think that there is a lot of that when Amazon is the seller but I have seen some real ripoffs offered by third parties.

That’s exactly the position I was in at megacorp and it was gospel that we as mfr could not set retail prices. In fact we were sued a few times but we always won because we charged everyone the same wholesale price and stayed away from setting retail prices. There are of course loopholes based on various details like volume, exclusivity, supply agreements etc but that does not set a minimum retail price.

Yes, but my recollection is that there was a court case (last 10-20 years?) that made minimum pricing legal. Google Fu just now gives me this: https://www.reinhartlaw.com/knowled...urns-century-old-rule-setting-minimum-prices/

 

[cathy63]

Amazon will no longer require third-party sellers to price their products on Amazon lower than they price them anywhere else. It quietly eliminated a clause in its contracts today that critics have called anti-competitive.

Interesting. It looks like they stopped that practice just after I quit selling there. I never sold on any other site, so it wasn't a big deal for me anyway, but I know a lot of other sellers were really unhappy about it.