You always ask yourself: how do they do it on Amazon? You see a product on a manufacturer’s website, and then you find that product on Amazon – a little cheaper, plus free shipping for Prime members, of which there are more than 200 million worldwide. It becomes understandable when you look at the dimensions of the world’s largest Amazon warehouse (372,000 square meters) that is currently being built in the small town of Ontario, California; the small trucks driving down the street and the sheer number of packages lying in front of the neighbor’s door. You think to yourself: Okay, they are logistically so efficient that they can simply be cheaper.
That may be the case, but there is apparently another reason, and that is why the US state of California has now sued the group: Amazon would abuse its market power to require retailers to charge higher prices on all other platforms via the terms and conditions. So not only at Amazon competitors like Walmart, Target or Ebay, but also on their own online shops. According to a study by the analysis firm Insider Intelligence, about 38 percent of all online sales in the US are made through Amazon.
Now you could ask: cheaper at Amazon, more expensive at everyone else – what’s the difference? “Retailers set their own prices for the products they sell to us,” reads the statement that Amazon sent in response to the lawsuit. Well, there is a huge difference, in the end the 84-page complaint that the SZ has received is all about that – namely about market power for the end customer. That’s why the lawsuit cites a study by analytics firm Feedvisor, which found that 74 percent of people go directly to Amazon when they want to buy a product.
Last year, a similar lawsuit was dismissed in the US capital Washington on the grounds that traders can sell their goods wherever they want; and that they don’t have to do it on the Amazon platform if they don’t like the conditions there. Put simply, this corresponded to the Amazon reading. It doesn’t help that the current lawsuit quotes retailers as saying: “There is no other platform, and Amazon knows it.” And: “There is no alternative.”
The Attorney General speaks of “forced agreements”
The current lawsuit is interesting from both a legal and moral point of view. “Amazon is forcing retailers into agreements to keep prices artificially high – knowing full well that they can’t say no,” said California Attorney General Rob Bonta. As other e-commerce platforms cannot compete with Amazon prices, Amazon becomes the one-stop shop for customers. “For years, Californians have been paying more to shop online because of Amazon’s anti-competitive business practices.” Higher prices because, according to the lawsuit, Amazon charges higher fees because of its market power.
That’s the crux of the matter, and it’s important in US competition law: it’s not about dealers, it’s about end customers. Therefore, the timing and wording of the lawsuit are also important: Californians, already shaken by inflation, would have to pay much more because of Amazon’s business practices. In addition to possible legal consequences, that would be a PR problem for Amazon. The company’s statement reads: “Amazon prides itself on offering low prices across the board; like any business, we reserve the right not to highlight offers if the price is not competitive.” The company has always boasted that the customer is king. A lawsuit that says the customer could be more of a court jester would be a PR disaster.
However, a data analysis by the Attorney General’s Office has shown that retailers have not lowered their prices for Amazon – they have increased them everywhere else. Anyone who didn’t do this should not only no longer be shown prominently, but should also have been suspended or thrown out. “Without free competition, in which different online retailers compete with each other via lower prices, prices are kept artificially higher than would be the case with intense competition,” says Attorney General Bonta, who recently dealt with lawsuits against Instagram or Tiktok as a fighter for the has profiled the people against big tech corporations. Amazon didn’t achieve this position because it was a more efficient retailer or marketplace, “but through forced agreements.”
“We could offer products at lower prices.”
The lawsuit therefore quotes retailers who give weight to the prosecutor’s argument on the customer side: “We pay fewer fees on our or other websites; we could offer products at lower prices.” However, they wouldn’t do it because then they would no longer appear in the platform’s purchase recommendations – which means they no longer exist on Amazon.
Bonta is demanding that Amazon change its business practices in California – where 25 million Prime customers live – and that it pay compensation. A specific amount is not mentioned. When asked by the SZ, it was said that this was not requested and that it was expected that this case could drag on. Amazon argues the other way around, as the statement shows: “The prosecutor’s demands would force Amazon to offer customers higher prices – which would violate one of the basic principles of antitrust law.” The company therefore hopes that the lawsuit will be dismissed.
The case, albeit limited to California, is likely to have wide repercussions. In Washington, the public prosecutor’s office announced that it intends to appeal against last year’s verdict; In addition, the federal agency FTC is investigating the acquisition of healthcare provider One Medical for $3.9 billion and details when registering and terminating prime accounts. There are two antitrust proceedings in Europe – one because of possible abuse of market power, one because of the suspicion that Amazon would prefer itself when it comes to purchase recommendations (the so-called “buy box”). Amazon had offered changes, the decision of the EU Commission is expected in the fall.