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D.C. attorney general goes after Amazon's first-party business in an amended antitrust complaint

D.C. attorney general goes after Amazon's first-party business

September 14, 2021: -On Monday, Washington, D.C. attorney general Karl Racine expanded his antitrust complaint against Amazon, targeting the company’s relationships with wholesale suppliers.

In May, Racine sued Amazon over allegations that it maintained monopoly power through its pricing contracts with third-party sellers illegally.

The amended complaint expands Racine’s beginning allegations to include what he claims are the anticompetitive effects of agreements of Amazon with first-party sellers, also known as FPS or wholesalers. The original complaint focused on how Amazon’s contracts with third-party sellers, or those selling on Amazon under their brand names, stifle competition.

The Washington Post first reported the news of Racine’s amended complaint.

Most of Amazon’s dominance in e-commerce has come from its third-party marketplace. That service comprises millions of independent merchants who rely on Amazon’s logistics and fulfillment services to get their goods to customers’ doorsteps. Amazon purchases products wholesale from other companies, famously vendors or first-party sellers, and then handles the selling process.

In the new filing, Racine alleges that Amazon’s “Minimum Margin Agreement” with first-party sellers has the “practical effect” of incentivizing those wholesalers to raise their prices for marketplaces outside of Amazon.

Racine also alleged first-party sellers may be inclined to raise their prices elsewhere “to ensure that Amazon does not drop its price based on lower prices elsewhere.”

“These agreements reduce other online marketplaces’ ability to compete with Amazon by offering lower prices to consumers,” according to the complaint, which goes on to say that the practice “results in reduced competition among online marketplaces and higher prices to consumers.”

Vendors such as popular phone accessory maker PopSockets have previously highlighted Amazon’s aggressive pricing tactics as a persistent issue they encountered when selling their products on the company’s marketplace.

In a statement, Racine said Amazon had used its dominant position in e-commerce to “rig the system,” resulting in higher prices for consumers and less competition among online marketplaces. Racine said his office uncovered Amazon’s “anticompetitive” agreements with first-party sellers while investigating its relationships with third-party sellers.

“I filed this antitrust lawsuit to stand up for consumers, hold Amazon accountable for its anticompetitive practices, and protect competition,” Racine said in a statement. “We’re continuing to do just that with this amended complaint that adds more of Amazon’s misconduct.”

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