Prosecutors asked the court to prevent Amazon from participating in the price increases it claimed. They also called on the court to “eliminate any ability of Amazon to damage competition,” including by changing its structure.
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May 25, 2021, 2:46 p.m. ET
Amazon has drawn particular attention from critics due to the broad nature of its business. The company operates a dominant web hosting operation, a streaming platform that competes with Netflix and Hulu and is expanding into brick and mortar grocery stores with the acquisition of Whole Foods.
However, Democrat Racine’s lawsuit affects the core of his business: the online marketplace for outside retailers, which accounts for more than half of the products he sells.
It’s about how Amazon monitors product retailer pricing on its website. Amazon had asked sellers to offer products at the same or lower prices as other websites. This is known as the “most favored nation policy”. Regulators in Europe, and later Senator Richard Blumenthal, Democrat of Connecticut, challenged the policy. In 2019, Amazon discontinued the service contract with sellers in the USA.
Mr Racine’s complaint states that Amazon replaced the policy in 2019 with “an effectively identical replacement” that it called the “Fair Pricing Policy”. This new policy, the complaint alleged, allowed Amazon to “sanction” sellers whose products are offered at lower prices elsewhere, even if listing on other platforms, including their own website, costs less.
Amazon has taken other measures to cap lower prices elsewhere. More importantly, sometimes prominent “Buy Now” and “Add to Cart” buttons have been removed from a product listing page, making it more cumbersome for a buyer to purchase the item. Salespeople say the change will reduce sales. The complaint states that Amazon can also completely ban sellers from its website.
“This is a fearful event for every seller on Amazon,” said James Thomson, a former Amazon employee who helped build the Amazon marketplace business and now advises sellers. He said there are legitimate reasons why a product might cost less elsewhere. For example, it might be cheaper to sell on another website, or one website might liquidate a product.