DC Attorney General Goes After Amazon’s Wholesale Biz In Antitrust Suit

Washington, DC, attorney general Karl Racine expanded his antitrust complaint against Amazon on Monday, September 13, targeting the company’s relationships with wholesale suppliers.

Racine sued Amazon in May over allegations that the company illegally maintained monopoly power through its pricing contracts with third-party sellers.

The amended complaint expands Racine’s initial allegations to include what he claims are the anticompetitive effects of Amazon’s agreements with first-party sellers, also known as FPS or wholesalers. The original complaint focused on how Amazon’s contracts with third-party sellers (TPS), or those who sell on Amazon under their own brand names, allegedly stifle competition.

The Washington Post first reported the news of Racine’s amended complaint. Much of Amazon’s dominance in e-commerce has come from its third-party marketplace. That service is made up of millions of independent merchants who rely on Amazon’s logistics and fulfillment services to get their goods to customers’ doorsteps. Amazon also buys products wholesale from other companies, known as vendors or first-party sellers, and then handles the selling process.

In the new filing, Racine alleges that Amazon’s “Minimum Margin Agreement” with first-party sellers has the “practical effect” of incentivizing those wholesalers to raise their prices for marketplaces outside of Amazon.

That’s because those agreements require that the wholesaler guarantee Amazon a minimum profit, according to the complaint, meaning the seller must make up the difference if it doesn’t reach that margin. Racine alleges first-party sellers may be inclined to raise their prices elsewhere “to ensure that Amazon does not drop its price based on lower prices elsewhere.”

“These agreements reduce other online marketplaces’ ability to compete with Amazon by offering lower prices to consumers,” according to the complaint, which goes on to say that the practice “results in reduced competition among online marketplaces and higher prices to consumers.”

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