'Sold By Amazon' Price-Fixing Program Shut Down Following Lawsuit

SEATTLE — Amazon will be forced to end its “Sold by Amazon” third-party seller program following an investigation and lawsuit from the state of Washington.

As part of the lawsuit and legally binding resolution, both filed Wednesday in King County Superior Court, the company will also pay $2.25 million to the attorney general’s office to fund future antitrust enforcement efforts.

“Consumers lose when corporate giants like Amazon fix prices to increase their profits,” Washington Attorney General Bob Ferguson said. “Today’s action promotes product innovation and consumer choice, and makes the market more competitive for sellers in Washington state and across the country.”

According to Ferguson, the Sold by Amazon program allowed the tech giant to agree on product prices with third-party sellers rather than compete with them. Ferguson's lawsuit argued the program violated antitrust laws and "unreasonably restrained competition" to maximize profits from third-party sales — creating what was essentially an illegal price-fixing racket.

"[Sold by Amazon] decreased competitive online offers for enrolled products," the lawsuit reads. "Prices on and off of www.amazon.com for consumers of most of those products were fixed, raised, maintained, or stabilized at artificially high levels through price increases, price floors, and/or discount prevention, requiring consumers to pay more for those products than they otherwise would have in a competitive market but for SBA."

From 2018 to 2020, several hundred third-party sellers were invited to join the Sold by Amazon program, a small fraction of the millions of third-party sellers who sell products through Amazon's website. According to the attorney general's office, Amazon enticed sellers into joining the program by guaranteeing they would receive at least a minimum payment for sales of their goods. In exchange, they'd agree to stop competing with Amazon over product pricing.

But Amazon would also get a cut of any sales that went above the minimum payment. In an example provided by the attorney general's office, if a seller and Amazon agreed to a $20 minimum payment, but the item sold for $25, Amazon would take a share of the extra $5 plus additional fees.

By fiddling with the sales algorithm, Amazon was then able to increase prices on some products, and even steer buyers to Amazon-branded alternatives, attorney general's office said.

"As a result, when prices increased, some sellers experienced a marked decline in the sales and resulting profits from products enrolled in the program," Ferguson said. "Faced with price increases, online customers sometimes opted to buy Amazon’s own branded products — particularly its private label products. This resulted in Amazon maximizing its own profits regardless of whether consumers paid a higher price for sales of products enrolled in the “Sold by Amazon” program or settled for buying the same or similar product offered through Amazon."

This is not the first time Amazon has faced antitrust accusations. Last year, Amazon faced at least two price-fixing lawsuits, one from District of Columbia Attorney General Karl Racine and another from a group of consumers in New York. The year before, the European Union filed an antitrust lawsuit against the company, accusing it of illegally collecting data from third-party sellers on its website to decide what products to sell and how much they should cost.

It's also not the first time Washington State has sued Amazon. Last fall, Amazon was ordered to pay the state $2.5 million after investigators found the company was illegally selling industrial-grade pesticides to consumers without the proper license.