(Bloomberg) — The Washington, D.C., attorney general expanded his lawsuit accusing Amazon.com Inc. of driving up prices — adding products that the online retail giant buys wholesale and sells to consumers directly.
Attorney General Karl Racine sued Amazon in May, the first government antitrust lawsuit to target the company in the U.S. Racine said Amazon’s rules for its hundreds of thousands of third-party sellers essentially prevent those sellers from listing their products for sale at a cheaper price on other sites, leading to artificially high prices.
Most of the items sold on Amazon are sold by such third-party sellers. But Amazon also operates a huge traditional retail business, in which it buys good directly from big consumer products companies and sells them itself. In an updated complaint, Racine alleges that Amazon’s conduct in that arena also encourages artificially high consumer prices.
Amazon’s sales agreements with its wholesalers include a “Minimum Margin Agreement,” in which wholesalers guarantee Amazon a certain minimum profit. If Amazon sells the product at a price that nets less than that agreed-upon profit, the wholesaler must compensate Amazon for the difference, a cost that can result in millions of dollars in payments to Amazon, the complaint says.
“As a practical effect of this agreement, FPSs have an incentive to maintain higher prices on other online marketplaces to ensure that Amazon does not drop its price based on lower prices elsewhere,” the complaint said, referring to first-party sellers.
Amazon didn’t immediately comment. In response to the original lawsuit, the company said: “The D.C. Attorney General has it exactly backwards — sellers set their own prices for the products they offer in our store. 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.”
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