I guess every big company is being called out for abusing its monopoly. Epic called out Apple and is currently in a legal battle with the smartphone giant. On the other hand, the District of Colombia has just sued Amazon, accusing the retail giant of inflating prices and abusing its monopoly. Apparently having a net worth of $186 billion wasn’t enough for Jeff Bezos.
Attorney General Karl Racine from Washington D.C is now suing Amazon for its unfair practices in inflating prices and stifling its competition. The lawsuit was filed yesterday in the DC Superior Court. The lawsuit allegedly says that Amazon has been violating the city’s Antitrust Act. Which says that it shall be unlawful for any person to monopolize, attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of trade or commerce.
Racine spoke to reporters, saying that Amazon has been “illegally abusing and maintaining its monopoly power by controlling prices across the online retail market”. According to Racine, Amazon puts serious restrictions on its third-party sellers whenever they post their products on Amazon’s marketplace.
Racine explained how the restrictions work, saying that “Third-party sellers have to agree that they will not offer their products anywhere else online, including their own websites, for a lower price than on Amazon”. Such agreements are also known as the most favored nation agreements. This basically means that a supplier agrees to treat a particular customer no worse than all other customers. Just here the supplier is a person trying to sell their product and the customer is a multi-billion dollar company.
Racine argues that agreements that follow this nature ultimately raise the price of the product for consumers by imposing a higher price base. It’s not like Amazon allows sellers to put up their products for free. Amazon’s fees paid by third-party sellers can be up to 40% of the actual product’s price. This results in the seller, putting up the product for a higher price and he can’t sell it anywhere else where the fees are cheaper.
Such agreements have led Amazon to have a firm stronghold in the online retail market. Racine said that “Amazon is estimated to have between 50 to 70% of the market share of the online retail sales market. By contrast, the next two largest retail platforms, Walmart.com and eBay, have only around 5% of the market each”.
Amazon released a statement following the lawsuit saying that the Attorney General “has it exactly backward – 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”.
I’m more inclined to believe that Amazon is trying to monopolize the online retail market. Big companies can’t be trusted.