Amazon’s vow to stop squeezing sellers was fake, California says

AMAZON.COM continued blocking sellers from offering lower prices on rival sites, despite assuring antitrust enforcers it ended its policy that artificially inflated prices for consumers, according to newly unsealed filings in California’s antitrust lawsuit against the e-commerce giant. 

The Seattle-based company planned to expand penalties on sellers who presented lower prices outside Amazon, even after it claimed in 2019 that it stopped punishing third-party merchants who posted better deals on Walmart, Target, eBay, and, in some instances, their own websites, according to previously redacted portions of the suit that were made public Friday (Apr 14).

Amazon knew its sellers lived “in constant fear” of account suspensions or fast-selling products being taken down, according to an internal company document cited in the complaint.

California Attorney General Rob Bonta is seeking a court order blocking Amazon from continuing to engage in what he alleged is anticompetitive behaviour, as well as compensation for consumers in the most populous US state. A similar suit filed by Washington, DC, was dismissed in 2021. 

An Amazon spokesperson didn’t immediately respond to a request for comment. Amazon has previously denied wrongdoing, saying the complaints are “exactly backwards” and that sellers set their own prices in the company’s online store. 

A San Francisco state judge in March denied Amazon’s request for dismissal of California’s claims, saying he was “unpersuaded” by the company’s argument that the state didn’t adequately allege how pricing practices had a market-wide anticompetitive effect.

Internal documents show an Amazon executive saying that expanded penalties “may generate pushback given recent positive press about our change to remove the previous price parity clause” from agreements with merchants that prevented third-party sellers from offering lower prices on other sites. The company expected the media and sellers would claim the policy “was not only trivial but a trick and an attempt to garner goodwill with policy makers amid increasing competition concerns,” according to the complaint.

The 2022 suit came three years after Bloomberg reported that the company’s policies were forcing sellers to charge more on competing sites like Walmart because Amazon would bury their products in search results if they offered lower prices elsewhere. 

Amazon’s vice president of pricing told the account manager of a seller who complained in 2019 about having to lower prices on Amazon to match his own online store that the merchant should should “control prices across all his channels,” according to internal communications cited in the complaint. 

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“[Y]ou might want to ask him to check if his sales on other sites directly or through distributors is putting him and us at a relative competitive disadvantage,” the executive wrote in a message that included a smiley emoji. “He might get the hint :)”  

California’s probe into Amazon’s practices also highlighted concerns that ads on the platform are unhelpful for customers.

“Amazon’s chief economist himself bemoaned the ‘secondary impacts on customer experience at Amazon stores” of ads to the extent they “reduce selection, are not relevant to the customer’s search, and/or lead to increases in prices,’” the state said in its complaint. 

The unsealed court filings include negative feedback from customers. “I can’t see how Amazon needs that much advertising,” one shopper wrote. “Amazon is not taxed, makes huge profits every year, yet they waste my time w/ products that are not relevant to my search.”

Amazon advertising revenue grew 19% in the fourth quarter ended Dec 31 to US$11.6 billion. The fast-growing revenue source helps prop up Amazon’s otherwise low-margin online retail business that carries the high expense of operating warehouses around the country and delivering orders to shoppers’ homes. BLOOMBERG