Why Amazon could have the upper hand in antitrust lawsuits

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(Reuters) – If there’s one thing I hate when shopping, it’s buying something and then finding the item on offer cheaper elsewhere.

Anxious to spare its customers such aggravation, Amazon.com said it “constantly compares” its prices to ensure that they are “as low or lower than all relevant competitors”.

Sounds good, at least in theory. Rather than searching 10 websites to find the best price on, say, a frying pan, I can simply click “Buy Now” on Amazon and be sure I got the optimal deal.

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Except it’s not that simple, as a trio of antitrust lawsuits — the most recent filed last week by California Attorney General Rob Bonta — against the $1.3 trillion e-commerce giant make clear. dollars.

While Amazon’s low-pricing policies may appear budget-focused and consumer-friendly, the lawsuits allege the company actually stifles price competition and uses its market power to coerce third-party sellers into agreeing not to. not sell their products at a lower price elsewhere. .

The result? Shoppers would pay more – around 6% to 16%, according to plaintiffs’ lawyers – than they should across a wide range of marketplaces and online stores.

An Amazon spokesperson told me the suits have it “exactly backwards.” Sellers set their own prices for the products they offer in our store. »

Although the plaintiffs’ claims seem compelling, antitrust experts tell me that enforcing them is likely to be tricky.

A key question in all three cases is whether Amazon’s commitment to the lowest prices “helps or hurts consumers,” said University of Minnesota Law School professor Tom Cotter. “In general, it is very difficult for plaintiffs to win on these types of claims.”

Indeed, one of the combinations has already failed, at least initially. In March, a District of Columbia Superior Court judge dismissed a complaint by Washington, D.C. Attorney General Karl Racine for failing to show that Amazon’s actions were anti-competitive.

Racine’s office, which did not respond to a request for comment, filed a notice of appeal.

Plaintiffs in federal court in Seattle fared better, where a group of trial attorneys from Quinn Emanuel Urquhart & Sullivan; Hagens Berman Sobol Shapiro; and Keller Postman led the way in 2020 by filing the first of Amazon’s price complaints.

Their possible class action is ambitious in its ambition, encompassing approximately 340 million products offered simultaneously on Amazon’s two competing e-commerce channels such as eBay or Walmart.com, and covering consumers in 18 states who have purchased goods online.

Amazon is represented by Paul, Weiss, Rifkind, Wharton & Garrison in the Seattle case, and was also represented by the firm in the DC case. Partner Karen Dunn declined to comment.

Crucially, the plaintiffs earlier this year survived a motion to dismiss, when U.S. District Judge Richard Jones found that the group’s representatives had standing to sue and that they “sufficiently allege the requisite anti-competitive conduct”.

Plaintiffs’ attorney Steve Berman, who is co-leading the case, told me their theory.

“Amazon charges high fees and selling commissions, so it costs third-party sellers much more to sell on Amazon Marketplace than to sell on their own websites which charge no fees, or on marketplaces online retail competitors (like eBay) who charge lower seller fees,” he said via email.

If third-party sellers hadn’t agreed to restrict their competition with Amazon, Berman continued, they “would lower their prices on online sites where it costs them less to sell, but instead they would raise their prices to match prices on Amazon Marketplace”. .”

In this scenario, consumers are the losers.

Or, as the California AG put it in its lawsuit, which was filed Sept. 14 in San Francisco Superior Court, Amazon is using its pricing policies to entrench its dominance, “preventing effective competition and harming consumers and to the California economy.

The states 84-page complaintwhich a spokesperson described as “the culmination of an extensive investigation lasting more than 2 years”, invokes California’s antitrust law, the Cartwright Act, and its unfair competition law.

The Cartwright Act “is a very good law to sue” for plaintiffs, New York University Law School professor Eleanor Fox told me. Unlike the federal Sherman Antitrust Act, it doesn’t require the state to convince the court that Amazon is a monopoly — a high bar — just that it’s dominant, which is “much easier to prove.”

Amazon in a blog post retorts that the AG “misinterprets Amazon’s practices”.

Yes, the company can crack down if a seller’s prices are “significantly higher than recent prices offered on or off Amazon,” according to the “Fair pricepolicy. But Amazon, in court documents, says the provision is intended to prevent price gouging (remember the vultures at the start of the pandemic were selling hand sanitizer for $50 a bottle?)

It’s also unclear what a satisfactory remedy would look like if the lawsuits were successful, notes Adam Kovacevich, founder and CEO of the House of Progress, which describes itself as a “center-left tech industry political coalition.”

As it stands, Amazon “considers the seller’s price elsewhere when deciding what to feature” in its coveted “Buy Now” box where most sales take place, he told me, a practice he considers beneficial to consumers.

More expensive deals can still be sold on its platform, Amazon says — they just aren’t featured in the Buy Now box. It “would only hurt consumers and sellers in Amazon’s store” if it were forced to “promote higher and uncompetitive prices to customers,” according to the company.

Penn State Law professor John Lopatka adds that Amazon could also claim its practices are designed to prevent “free riding,” where people browse Amazon but buy from a low-cost rival. Amazon “provides a service it doesn’t charge for — easy comparison shopping,” Lopatka said in an email.

He added: “And on a practical level, plaintiffs are going to have a hard time convincing consumers who have come to depend on Amazon that they are really being ripped off by it.”

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