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Amazon Policy Leads to Higher Consumer Prices, D.C. Suit Alleges


WASHINGTON—The District of Columbia filed an antitrust lawsuit against

Amazon.com Inc.

AMZN 0.43%

on Tuesday, alleging the company blocks sellers on its marketplace from offering lower prices elsewhere to stymie competition.

The lawsuit, filed in Washington, D.C., Superior Court, targets “most favored nation” clauses Amazon has imposed on sellers on its online marketplaces. The clauses prevent Amazon sellers from offering lower prices on other websites, including their own, D.C. Attorney General Karl Racine said.

In a statement, Amazon said that sellers on its site set their own prices.

“Like any store we reserve the right not to highlight offers to customers that are not priced competitively,” Amazon said. “The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”

The lawsuit targets agreements between Amazon and third-party sellers on the Amazon marketplace, which Mr. Racine said accounts for more than half of all online retail sales.

The agreements lead to higher prices for consumers, Mr. Racine said. That is because prices on Amazon incorporate Amazon-imposed fees as high as 40% of the product price, and Amazon sellers can’t offer lower prices on other websites, he said.

Amazon says its seller fees are competitive.

Mr. Racine said the agreements also result in less innovation.

“Amazon wins because it controls pricing across the online retail sales market, putting itself at an advantage over everyone else,” Mr. Racine said on a call with reporters. “These restrictions allow Amazon to build and maintain monopoly power.”

Until 2019, Amazon explicitly prohibited U.S. sellers from offering their products at a lower price or better terms elsewhere online, the lawsuit says. Amazon removed that policy but replaced it with a new “Fair Pricing Policy” that was an “effectively identical substitute,” the lawsuit says.

Mr. Racine said he hoped the lawsuit will help put an end to such agreements.

The Fair Pricing Policy allows sellers to set their own prices, according to Amazon. The company also monitors prices elsewhere on the web. If a seller offers a product on Amazon for a higher price than listed elsewhere, Amazon may not feature that seller’s offer. The company may send the seller a warning to that effect.

Amazon has said the policy is designed to protect consumers from being overcharged, as well as to give sellers information so that their offers can be featured. The company says it decides which offers to feature based on price, delivery speed, and other factors.

Mr. Racine says the policy ends up hurting consumers because it leads sellers to choose not to offer lower prices on websites not named Amazon, even when the sellers may want to do so.

For example, a seller might want to offer a product on

Walmart’s

website at a lower price than on Amazon if Walmart took a lower cut of each sale.

“Walmart routinely fields requests from merchants to raise prices on Walmart’s online retail sales platform because the merchants worry that a lower price on Walmart will jeopardize their status on Amazon,” the lawsuit alleges.

The suit also claims that sellers are inclined to bend to Amazon’s wishes because so many consumers shop there. “Fear of Amazon may even cause sellers to remove listings from other online market platforms entirely,” the lawsuit says.

Walmart didn’t immediately respond to a request for comment.

With respect to the fees paid by Amazon sellers, Amazon has said it wants to help sellers succeed and the fees cover services provided to them.

The lawsuit cites violations of Washington, D.C., law rather than federal law, which could limit the case’s ultimate impact. In other recent antitrust lawsuits against

Facebook Inc.

and

Alphabet Inc.’s

Google, Mr. Racine joined multiple states to bring their complaints before a federal court.

Mr. Racine said states could join Tuesday’s action, but so far Washington, D.C., has conducted its own investigation. The Federal Trade Commission and other U.S. states have also been probing some of Amazon’s business practices.

Mr. Racine, a Democrat, is under consideration to be nominated by President

Biden

to chair the FTC, according to people familiar with the matter. Asked about that possibility Tuesday, he said: “The FTC matter is up to the president. I’m not talking about that.”

Amazon’s Battles

More WSJ coverage of antitrust issues facing the tech company, selected by the editors

Write to Ryan Tracy at ryan.tracy@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



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