Amazon Must Pay $2 Million and End Program After Price Fixing Investigation by Washington AG – Techdoxx

Deepak Gupta January 28, 2022
Updated 2022/01/28 at 1:17 AM

Amazon must pay $2.25 million and terminate permanently a previously suspended sales program, following an investigation and lawsuit by the Washington Attorney General alleging it was essentially price fixing.

“Sold By Amazon” basically worked like this. Amazon would contact a third-party seller and they would agree on a minimum price for an item. If Amazon sold the item for more, they would split the profits. In some ways, it’s not that different from buying a bunch of stuff wholesale and reselling it. But because of the way Amazon dynamically prices and presents items in-store, that’s not quite what happened.

As the AG office explains, Amazon ended up raising the price of items to match other retailers and prevented sellers from offering discounts. As a result, shoppers were often tricked into buying Amazon’s own brands, which they could price however they liked:

Prices for the vast majority of the remaining products enrolled in the “Sold by Amazon” program have stabilized at artificially high levels.

…As prices increased, some vendors experienced a sharp drop in sales and profits resulting from products enrolled in the program. In the face of price increases, online shoppers sometimes opted to buy Amazon’s own-brand products—particularly its own-brand products. This has resulted in Amazon maximizing its own profits, regardless of whether consumers pay a higher price for selling products enrolled in the “Sold by Amazon” program or are content to buy the same or similar product offered by Amazon.

It sounds like bad business for sellers, but more fundamentally, Washington AG Bob Ferguson claimed the practice violated state antitrust laws. Amazon may be a store, but it also sells its own products, thus competing with the third-party sellers in question. And two competitors making a secret deal controlling the cost of goods is pretty much the definition of price fixing.

Amazon disputed AG’s characterization, saying it was all for the good of the customer and completely on the level. It also claimed to have terminated the program for “commercial reasons unrelated to the AG investigation.” “While we strongly believe the program was legal, we are happy to have this matter resolved,” the company said in a statement to Ploonge.

It is an extraordinary coincidence, then, that a program that had been expanding since 2018 was terminated almost immediately after antitrust authorities began investigating. “We launched the investigation in March 2020 and Amazon suspended the program in June,” said Dan Jackson of the AG office. Maybe it was just the time.

In any case, instead of fighting the lawsuit in court, Amazon agreed to a consent decree demanding the payment of $2.25 million (which will go directly to fund AG’s antitrust division) and prohibiting Amazon from reactivating. the program anyway.

“Consumers lose out when corporate giants like Amazon set prices to increase their profits. Today’s action promotes product innovation and consumer choice, and makes the marketplace more competitive for sellers in Washington State and across the country,” said Ferguson.

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