Amazon's Monopolistic Practices Create 'Artificially High' E-Commerce Prices: Class Action

Amazon’s market power over sellers creates “artificially high prices across the web,” alleges a Tuesday antitrust class action (docket 2:23-cv-01523) in U.S. District Court for Western Washington in Seattle. Rather than fostering a free and competitive e-commerce economy, “Amazon chose the path of quick and unfettered profits by unlawfully exercising their monopolistic powers in violation of antitrust law,” it said.

Amazon “commands unrivaled dominance over online retail” in the U.S., said plaintiff Christopher Hopper, a San Mateo County, California, resident, who bought items on other websites, including Wayfair.com, that were also sold on Amazon for an “artificially inflated price,” the complaint said. Hopper bought items from third-party sellers on the Amazon Marketplace, including Tevra Brands, Axio Supply and Daybetter US, “for an artificially inflated price as a result of Amazon’s improper bundling,” it said.

The e-commerce company “tricks consumers into thinking they are getting the lowest prices possible, when in fact Amazon's coercive 'price-parity’ agreements with its sellers" insulate the e-tailer from price competition, furthers its dominance and “hurts consumers,” the complaint said. Competitors including Walmart.com, eBay and Target.com can’t pull customers away from Amazon with lower prices, “because Amazon compels suppliers and sellers to cause the prices on those competing websites to be the same or higher than the prices for the same products on Amazon," the complaint alleges: “This artificial restriction of Amazon alternatives gives customers little reason to shop elsewhere.”

About a third of U.S. consumers begin all online shopping on Amazon’s marketplace; it captures 41 cents of every dollar spent online in the U.S., the complaint said, citing a 2019 CNBC article. Amazon’s annual sales are 37.8% of the U.S. e-commerce market, more than the next 15 largest online retailers combined, it said, citing 2022 Statista figures. The e-commerce company’s $250.2 billion in retail sales in 2022 were an average $685 million per day; Amazon is so large it has “become an economy unto itself,” the complaint said.

Amazon’s “massive growth and market power” came at the expense of consumers, said the complaint. Its customers are “overcharged” because it imposes “artificially high prices on the entirety of the internet.” The e-tailer “coerced and induced its third-party sellers and wholesale suppliers to enter into anticompetitive agreements on price, and has improperly bundled its services, resulting in higher, unavoidable fees,” said the complaint.

Its monopoly power also allowed Amazon to “degrade the services it provides customers,” the complaint alleges. Where a product search once resulted in “the most relevant and well-reviewed product,” now the e-commerce site is “plastered with pay-to-play advertisements,” that often “take up over half the search results page on desktop and browser,” it said. Amazon chooses to show ads that are “less relevant to consumers than organic search results and recommendations, knowing that it harms the customer experience, because they are the source of billions in profits,” it said.

Over 80% of Amazon's third-party sellers use its Fulfilled by Amazon (FBA) service, which stores their inventory and handles picking, packing, shipping and customer service, said the complaint. Sellers who don’t use FBA are deprived of selling to Prime members, a segment that spends much more than average non-Prime Amazon shoppers, it said. “Without the Prime badge, sellers effectively disappear from Amazon’s storefront and are considered vastly less desirable by Prime members,” it said. Sellers, as a result, are “forced to purchase the FBA services to access the full reach” of Amazon marketplace services, it said.

Amazon penalizes sellers for listing products at lower prices on other websites, the complaint alleged. Though the company bowed to government scrutiny in 2019 and dropped contractual requirements preventing sellers from offering their goods for lower prices elsewhere, it now uses “less explicit, anti-discounting tactics to disincentivize and discipline sellers who offer lower-priced goods elsewhere,” the complaint said. It has a “sophisticated surveillance network of web crawlers” that monitor the internet searching for products listed on Amazon that are discounted elsewhere, it said. “If Amazon software detects a product listed cheaper on a competitor’s website, it often will remove important buttons like ‘Buy Now’ and ‘Add to Cart’ from the product’s listing page, it said. That requires customers to go through “several additional levels of interface,” to see offers or other sellers for a product.

Amazon uses its “chokehold on the online shopping market to improperly impose a price floor and separate customers from their hard-earned money through anticompetitive and unfair means,” the complaint alleged. Through whistleblowers and leaked documents, “the public now knows that Amazon was aware of the consequences of their tactics when they deliberately and intentionally forced sellers to raise their prices on other websites in order to keep their position on Amazon’s Marketplace while steadily increasing their own fees and passing them on to consumers across the internet,” it said, referencing FTC and state attorney general cases.

Hopper asserts claims of price fixing, monopolization and violations of the Washington Consumer Protection and Cartwright acts. He seeks orders certifying plaintiffs and proposed bundling and retail e-commerce class members constitute two subclasses, with him as class representative, separately, of the two subclasses. He seeks an award of permanent public injunctive relief against Amazon; actual and treble damages; equitable relief requiring Amazon to cease its “abusive, unlawful and anti-competitive practices" and reasonable attorneys’ fees and costs. Amazon didn't comment.