Amazon.com Inc. started the month of March with two suits on opposite coasts challenging the rules it imposes on the platform’s merchants which prohibit them from offering better prices on competing platforms and even on their own websites. The company’s position – stated in cases against it in Washington, DC, and Washington State – has been that price restrictions like these are legal, common in the retail industry, pro-competitive, and encourage low prices.
This month the company secured a motion to dismiss in Superior Court for the District of Columbia but did not fare as well in federal court in Seattle where a proposed class action on behalf of consumers from 18 states has been allowed to move forward.
Attorney General for the District of Columbia General Karl A. Racine said in his May 2021 complaint that constraints placed on third-party Amazon.com sellers by its Business Solutions Agreement artificially raises consumer prices, denies them choice, stifles innovation, and hampers competition.
The anticompetitive impact of Amazon’s conduct, the suit alleged, was compounded by a “complex scheme of fees and extra charges” imposed on merchants, adding charges as high as 40% of a product’s price. The complaint listed these and other allegedly anticompetitive practices which Racine said violated the D.C. Antitrust Act, including illegal horizontal and vertical agreements, operating Amazon Prime at a loss while collecting troves of customer data, and using merchant data in selling Amazon-branded products in competition with its own merchant customers (District of Columbia v. Amazon.com, Inc., D.C., Super. Ct., Civil Div., No. 2021-CA-001775-B).
Facing pressure from investigations launched by the U.K. and Germany in 2013, Amazon removed the so-called Price Parity Provision (PPP) from the European market but maintained it for the U.S. market. In 2019 Amazon removed the PPP in the U.S. in response to “intense scrutiny” from Congress and U.S. regulators, the complaint said, but quickly replaced the PPP with an “effectively-identical substitute” called the Fair Pricing Policy.
Amazon controls as much as 70% of the U.S. online retail sales market and an even greater share of the multi-seller online retail platform market. Walmart.com and eBay each has just roughly 5% market share.
For now at least, AG Racine’s case is over. Ruling from the bench on March 18, DC Superior Court Judge Hiram E. Puig-Lugo granted Amazon’s motion to dismiss. There is no word yet on whether Racine will appeal, but some are rooting that he will.
The American Economic Liberties Project (ELP) believes Racine’s case was “detailed, factually rigorous, and legally sound.” Judge Puig-Lugo had no grounds to dismiss such a “vital” case, an ELP statement read, nor did he provide any in writing. His comments from the bench indicate he was “unfamiliar with the record, the market structure in online commerce, and the basics of antitrust law,” the group commented
Amazon was less successful in the Northwest, however. On March 11, U.S. District Judge Richard A. Jones, presiding in the Western District of Washington, denied in part and granted in part Amazon’s motion to dismiss. However, he gave the plaintiffs time to file an amended complaint to rectify deficiencies he outlined (Frame-Wilson, et al., v. Amazon.com, Inc., No. 2:20-cv-00424-RAJ, W.D. Wash.).
Judge Jones denied Amazon’s motion to dismiss the plaintiffs’ Sherman Act Section 1 restraint of trade claim under a rule of reason and their Sherman Act Section 2 monopoly claims. He said in part that the plaintiffs established that they are “direct purchasers of antitrust co-conspirators” and that they have adequately argued that they have suffered antitrust injury.
The judge granted Amazon’s motion to dismiss the plaintiffs’ allegation of a per se Sherman Act Section 1 violation. The plaintiffs did not plausibly allege a horizontal agreement between Amazon and third-party sellers as “competitors” with respect to the so-called “most favored nation” provisions of the selling agreement, the judge found. Without that, or without legal authority supporting per se analysis in the absence of a horizontal agreement or an inference of one, Judge Jones said the allegations of a per se violation failed as “conclusory and unsupported.”
He also denied the plaintiffs’ claims based on state antitrust and restraint of trade laws, consumer protection statutes, and unjust enrichment. Judge Jones said, however, that because the plaintiffs’ complaint could be corrected by alleging other facts, he gave them 30 days to file a new one.