California launches suit against Amazon alleging anticompetitive contracts with retailers

California Atty. Gen. Rob Bonta announced a lawsuit against Amazon on Wednesday, accusing the Seattle-based e-commerce giant of anticompetitive behavior in its dealings with third-party merchants.

“For years, California consumers have paid more for their online purchases because of Amazon’s anticompetitive contracting practices,� Bonta said in a statement issued prior to a Wednesday news conference. “Amazon coerces merchants into agreements that keep prices artificially high, knowing full well that they can’t afford to say no. With other e-commerce platforms unable to compete on price, consumers turn to Amazon as a one-stop-shop for all their purchases.�

The result, he added, is continued market dominance for a trillion-dollar-plus company that only got bigger during the pandemic — “allowing the company to make increasingly untenable demands on its merchants and costing consumers more at checkout across California.�

In a statement emailed to The Times, an Amazon spokesperson disputed Bonta’s characterization of the company.

“Sellers set their own prices for the products they offer in our store,� the spokesperson said. “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. The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.�

The attorney general’s office alleges that Amazon broke California’s Unfair Competition Law — the legal basis for a wide variety of consumer protection suits — and the Cartwright Act, a state antitrust law.

Under their agreements with Amazon, third-party retailers and wholesalers have been barred from offering lower prices on other sites, including not just those of Amazon competitors such as Walmart, Target and EBay but also, in some cases, their own websites, the attorney general’s office said in a news release.

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What’s more, merchants can be obligated to compensate the tech giant if other online outlets do offer better prices, the statement adds. Noncompliant merchants reportedly “face sanctions such as less prominent listings and even the possibility of termination or suspension.�

According to a copy of the suit, data analysis undertaken by Bonta’s office indicated that merchants typically did not lower their Amazon prices in order to comply with the contracts, instead raising them elsewhere.

Bonta now wants the San Francisco County Superior Court to prohibit Amazon from engaging in these contracts, and have the company “return its ill-gotten gains� and account for the increased prices that consumers have had to pay as a result.

The attorney general’s office told The Times that the impending litigation will be lengthy, but declined to offer a specific timeline for the case.

Amazon hopes the case will be promptly dismissed, the company spokesperson said.

It’s not the first shot the attorney general has fired across Big Tech’s bow, despite the sector’s prominence in the state. In March, Bonta announced an interstate investigation into the risks the social media app TikTok poses to children; that undertaking followed a similar investigation into Instagram that Bonta announced in late 2021.