California alleges Amazon inflated prices with supplier deals

David Ingram

In this article

A worker sorts out parcels in the outbound dock at the Amazon fulfillment center in Eastvale, California, on Aug. 31, 2021.
Watchara Phomicinda | MediaNews Group | The Riverside Press-Enterprise via Getty Images

SAN FRANCISCO — The state of California sued Amazon on Wednesday, accusing the retail giant of inflating its prices by signing restrictive deals with companies that sell on its platform. 

California Attorney General Rob Bonta said that an investigation by his office had found that sellers who use Amazon's online marketplace would lower their prices if not for agreements they had with Amazon. As a result, he said, the state's consumers had overpaid for years. 

"With today's lawsuit, we're fighting back," Bonta, a Democrat, said Wednesday in a statement issued before a planned news conference. 

"We won't allow Amazon to bend the market to its will at the expense of California consumers, small-business owners and a fair and competitive economy," he said.

Amazon representatives did not immediately respond to a request for comment on the lawsuit. The company has denied violating antitrust laws in similar cases. 

The lawsuit ratchets up the criticism of the largest U.S. tech companies, which because of their size were already under intense scrutiny in courthouses, regulatory offices and legislative chambers across the country. 

At issue is what's known as "most favored nation" pricing models, where a purchaser or a platform such as Amazon has a deal with a supplier to get the lowest available price. 

Years ago, European regulators and U.S. lawmakers criticized Amazon for using such deals, saying they created a disincentive for suppliers to lower prices elsewhere. And in 2019, Amazon abandoned the deals in favor of a different pricing model that it said gives sellers responsibility for setting their own prices. 

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But Bonta's office said Amazon still has made agreements that lead to higher prices. The lawsuit asks a state court to bar Amazon from anticompetitive contracts, appoint a monitor and impose damages and penalties. 

The lawsuit describes one alleged example where a "a large consumer electronics device supplier" tried to offer a discount through an Amazon competitor. Amazon then demanded a $100,000 payment from the supplier to maintain Amazon's agreed-upon profit margin, according to the suit. The experience reduced the supplier's "appetite for offering product discounts" going forward, the suit says. 

Similar lawsuits about Amazon's pricing policies have had mixed results in recent years. 

Last year, a judge dismissed a lawsuit filed by the attorney general for the District of Columbia over Amazon's pricing system, ruling that the lawsuit lacked enough factual details to be plausible. The ruling is on appeal. 

But in March, a federal judge in Seattle ruled that a group of consumers could move ahead with a separate lawsuit making somewhat similar claims. The consumers are asking their suit to be recognized as a class action. 

The California lawsuit filed Wednesday is different because it's based on the state's laws, which are more sweeping than federal law or those in Washington, D.C., and include a broad prohibition on "unfair competition." 

California's laws have bitten Apple, among other companies. Last year, a federal judge threw out federal antitrust claims that Epic Games brought against Apple but allowed a claim under California law to move forward