CA Sues Amazon Over Anti-Competitive Practices That Violate State Laws

CALIFORNIA — The Golden State announced a lawsuit Wednesday against Amazon, accusing the company of violating the state's antitrust and unfair competition laws by penalizing merchants for offering products at a lower price elsewhere.

The lawsuit, filed by State Attorney General Rob Bonta, would force Amazon to lift restrictions on its third-party vendors, redefining its business model.

"Amazon coerces merchants into deals that keep prices artificially high, knowing full well they have no real alternative," Bonta tweeted on Wednesday. "We won't let Amazon bend the market to its will at the expense of consumers and the economy."

Bonta's office says Amazon implemented contract provisions to prohibit third-party sellers and wholesale suppliers from offering lower prices for products on non-Amazon sites, including on their own websites. The restrictions prevent retailers from competing with the e-commerce giant.

"Amazon has stifled its competition for years, not by successfully competing, but by blocking competition on price," Bonta said in a statement. "As a result, California families paid more, and now Amazon must pay the price.”

The state argues that Amazon violated state laws by engaging in practices that squash competition with other retailers by pushing for higher prices. Bonta seeks to do away with these anti-competitive practices and require restitution for merchants.

"The reality is: Many of the products we buy online would be cheaper if Amazon dropped its constraints on market forces," Bonta said.

Amazon has not publicly commented on the complaint. It has said it has the right to avoid highlighting products that are not priced competitively.

The suit also seeks a court order to compel Amazon to pay damages to the state for increased prices. State officials did not say how much money they are seeking.

The 84-page complaint is nearly identical to a suit filed last year by the District of Columbia, which was dismissed by a district judge earlier this year and is now going through an appeals process. Last year's suit argues that third-party contracts artificially cause price inflation.

Meanwhile, Amazon is increasingly facing mounting political pressure from both state and federal regulators. The Federal Trade Commission is investigating Amazon’s $3.9 billion acquisition of the primary health organization One Medical as well as the sign-up and cancellation practices of Amazon Prime, the company’s paid subscription service that offers deals and faster shipping.

Earlier this year, congressional lawmakers urged the Justice Department to investigate if the company collects data on sellers to develop competing products and offer them more prominently on its site. Critics have also lambasted the increasing fees imposed on sellers, which makes it more difficult for merchants to enter the market.

Bonta previously targeted Amazon when he secured a court order last year asking the online retail giant to reveal more information about its workplace COVID-19 case numbers. He has also pushed for more regulations on the environmental impacts of fulfillment warehouses.

The Associated Press contributed to this report.

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