New Antitrust Suit Signals a Renewed Interest in Antitrust Enforcement
An antitrust lawsuit against Amazon, along with DOJ actions involving other major companies and industries, means the government’s renewed focus on antitrust enforcement is not likely to slow soon.
Earlier this year, the Attorney General for the District of Columbia, Karl Racine, filed suit against the online retailer giant Amazon.com Inc. for allegedly engaging in business practices that violate antitrust laws and regulations. The lawsuit alleges that Amazon engages in anticompetitive business practices that “cause prices across the entire online retail sales market to be artificially inflated, both for products sold on Amazon’s online retail sales platform and on its competitors’ online retail sales platforms.”
The antitrust suit follows the release of a 451-page report issued by the House Judiciary Committee in October of last year analyzing the business practices of Amazon, Apple, Facebook, and Google. As noted in its report, the Committee found that Amazon engaged in a “pattern of exploiting sellers, enabled by its market dominance,” which, as the Committee stated, “raises serious competition concerns.”
At the heart of these concerns is Amazon’s treatment of third-party sellers, which comprise a significant portion of its online marketplace. According to the Committee’s report, Amazon has “monopoly power” over these small- and medium-sized businesses, many of which rely on Amazon as their main source of income and do not have viable alternatives for selling their products online. This is because until recently, Amazon required its third-party sellers to abide by a “most-favored-nation (MFN) clause,” under which sellers were prohibited from offering their products for a lower price on any other platform, including the seller’s own website.
Although the MFN clause was eventually removed from its third-party-seller contracts, both the Committee report and the antitrust suit allege that Amazon is still enforcing the MFN clause in practice by penalizing sellers that do not comply — most often by removing their products from prominent placements on the retailer’s website and its “best of” or “similar products” lists.
As reflected in an amended complaint filed earlier this month, the scope of the DC antitrust suit was recently expanded to include Amazon’s relationship with wholesale suppliers. Specifically at issue is the company’s “Minimum Margin Agreement” (MMA) with first-party sellers, which AG Racine alleges has the anticompetitive effect of incentivizing first-party sellers to raise their prices for marketplaces outside of Amazon. Under the MMA, Amazon is guaranteed a minimum profit margin that the first-party seller must make up if not met.
In response, Amazon claims that the relief sought in the suit “would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.” It also criticizes the move as a “misguided intervention in the free market” that would “punish consumers by forcing small businesses out of popular online stores, raising prices, and reducing consumer choice and convenience.”
The attorneys general of several states, including Massachusetts, Pennsylvania, California, New York, and Washington, are also reportedly pursuing potential antitrust suits against Amazon. Internationally, Canadian regulators are reportedly looking into “abuse of dominance” claims against Amazon. The company also faces a formal investigation of anticompetitive practices by the European Union Commission and an antitrust case filed by a group of more than 2,000 online sellers in India.
Back home, coalitions have formed between small businesses, including “mom and pop” hardware stores, grocers, and independent booksellers, and merchant groups to pressure federal and state lawmakers to adopt antitrust legislation specifically aimed at Amazon. Additionally, a class-action suit against Amazon and the “Big Five” publishing companies was filed in federal district court that alleges the defendants engaged in “a massive price-fixing scheme to intentionally constrain the bookselling market and inflate the wholesale price of print books.”
In addition to the antitrust enforcement efforts taken against Amazon, the DOJ is also reportedly preparing to initiate an antitrust suit against Google for alleged anticompetitive practices related to the company’s advertising services. Beyond the tech industry, the DOJ has also recently filed lawsuits aimed at preventing mergers in the sugar manufacturing, book publishing, and airline industries, indicating that the government’s renewed focus on antitrust enforcement is not likely to slow in the near future.
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