The antitrust case against Amazon: Analyzing the D.C. attorney general’s suit against the tech giant
An antitrust lawsuit filed against Amazon by Washington, D.C., Attorney General Karl Racine this week promises to test the evidence and allegations that have been marshaled against the tech giant by U.S. legislators and regulators.
It leans heavily on findings from a U.S. House antitrust report last year, alleging that Amazon illegally manipulates the e-commerce market to its advantage by penalizing third-party sellers that offer products at lower prices on other platforms.
In addition, the suit alleges that the fees Amazon charges to sellers increase their expenses and ultimately raise consumer prices.
For many years, Amazon required third-party sellers to explicitly agree not to sell the same products for less on other sites, as a condition of selling on Amazon.com. That explicit clause has since been removed from the company’s standard contract with sellers. But in practice, the suit alleges, Amazon still penalizes sellers that offer lower prices on other sites, by removing them from promoted positions on product detail pages, taking them out of the “Buy Box,” as it’s known.
Wait a second, isn’t it a good thing for consumers — supporting the very purpose of antitrust law — for Amazon to promote the lowest-price products?
That is the essence of Amazon’s response, and it’s one reason the case is so interesting, promising to put the spotlight not just on Amazon’s business tactics but on the potential need to upgrade antitrust laws and regulations for a new era of commerce.
At first glance, the suit faces an uphill battle in at least a couple areas:
It’s no slam dunk to prove that Amazon on the whole has an inflationary impact on online pricing. In fact, Federal Trade Commission nominee Lina Khan’s fundamental premise in her widely cited Yale Law Journal article, “Amazon’s Antitrust Paradox,” was that a company can abuse its market power even if it uses that power to lower prices for consumers.
The lawsuit makes what appears to be a liberal interpretation of Amazon’s market share, putting it at 50% to 70% of online sales, vs. the 40% cited in the most recent installment of a widely followed eMarketer study. Amazon argues that the relevant market should actually be all retail sales, online and offline, of which it claims a much smaller slice.
However, the allegations in the suit ring true to the experience of Jason Boyce of Avenue7Media, a former Amazon third-party seller and GeekWire’s collaborator on the Day 2 podcast.
On this episode, recorded shortly after the suit was announced, Jason talks about his own experiences with “Buy Box suppression.” At his former company, for example, he experimented at one point by selling his products at lower products on other sites, only to lose its promotional placement on Amazon.
“Our sales just really started to tank,” he recalls. “And we went back and forth with Amazon, we still didn’t get an answer. … We raised our prices on all the other channels, and within hours, the buy button came back.”
It’s no coincidence that his experience mesh with the allegations in the lawsuit. We originally connected with Jason after spotting him last year as one of the sources cited in the footnotes of the House antitrust report — the same report that formed the basis for a portion of the D.C. attorney general’s lawsuit.
We talk about his experiences as a third-party seller, debate the relative merits of the antitrust suit, and consider the implications for incoming Amazon CEO Andy Jassy on this episode of Day 2, GeekWire’s podcast about everything Amazon.
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