California sues Amazon, alleges tech giant stifled competition

California Attorney General Rob Bonta (D) sued Amazon on Wednesday, alleging the e-commerce giant has stifled competition in a way that has increased prices for California consumers. 

The lawsuit alleges that Amazon requires merchants to enter into agreements that penalize them if their products are offered for a lower price for sale off Amazon, leading to higher prices for consumers.

“Amazon makes consumers think they are getting the lowest prices possible, when in fact, they cannot get the low prices that would prevail in a freely competitive market because Amazon has coerced and induced its third-party sellers and wholesale suppliers to enter into anticompetitive agreements on price,” California alleges in the complaint. 

“The intent and effect of these agreements is to insulate Amazon from price competition, entrenching Amazon’s dominance, preventing effective competition, and harming consumers and the California economy,” it adds. 

The lawsuit alleges that Amazon is able to “extract these anti competitive terms” from third-party sellers and wholesale suppliers because of its role as “dominant online retail store” in the U.S. For hundreds of thousands of third-party sellers, Amazon sales are “effectively their entire business,” and even for larger brands, Amazon sales make up about 20 to 30 percent of total sales, the complaint alleges. 

An Amazon spokesperson denied the allegations of anticompetitive behavior, referencing the same argument the company made in a case brought by Washington, D.C., Attorney General Karl Racine (D) that was dismissed earlier this year. 

“The California Attorney General has it exactly backwards. Sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively,” the spokesperson said in a statement. 

“The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law. We hope that the California court will reach the same conclusion as the D.C. court and dismiss this lawsuit promptly,” the spokesperson added. 

This is the latest in a long line of state-led lawsuits against tech giants. Other cases are being brought against Meta and Google. A Texas-led case against Google will largely proceed after a judge’s ruling on Tuesday. 

California’s case is similar to allegations raised by Racine. The D.C. attorney general filed a notice of appeal last month in an effort to revive the case. 

Amazon denied the allegations of anticompetitive practice in the D.C. case.