What you need to know
- Amazon will shut down its "Sold by Amazon" third-party seller program following an antitrust investigation.
- Washington AG said the company forced sellers to sell their products at "artificially high levels", thereby stifling competition.
- The retail giant will also pay $2.25 million to the state AG for antitrust enforcement efforts.
Amazon is embroiled in yet another antitrust lawsuit for allegedly fixing third-party prices and undermining competition. The retail giant's third-party seller program "Sold by Amazon" is shutting down following the Washington state attorney general's investigation into the unlawful practice.
Washington AG Bob Ferguson said in a press release that "Amazon unreasonably restrained competition in order to maximize its own profits off third-party sales." The program's pricing algorithm allegedly raised the prices offered by third-party retailers, to which they must agree in order to stay in the program.
"The 'Sold by Amazon' program resulted in prices for some products increasing when Amazon programmed its pricing algorithm to match the prices that certain external retailers offer to online consumers," the AG said.
Sold by Amazon started in 2018, allowing the retail giant to agree on price with third-party sellers in exchange for a guaranteed minimum payment for product sales. However, this meant they had to "stop competing with Amazon for the pricing of their products." And if Amazon sold the product for more, the profit would be split among themselves.
The price fixing practice limited the sellers' ability, if any, to reduce the price of their products as long as they're enrolled in the program, the AG said. Sellers were also prevented from offering discounts unless they dropped out of the program. As a result, some retailers experienced a drop in sales and profits as customers chose to buy the same product bearing Amazon's brand, such as its best Alexa devices and Amazon Echo Show.
"Consumers lose when corporate giants like Amazon fix prices to increase their profits," Ferguson said.
Amazon, on the other hand, took exception to the AG's claims, saying the program was legal. A company representative told Android Central:
This was a small program to provide another tool to help sellers offer lower prices, much like similar programs common among other retailers, that has since been discontinued. While we strongly believe the program was legal, we're glad to have this matter resolved.
In addition to terminating the program, Amazon will pay the AG's office $2.25 million to assist with antitrust enforcement in the case. It is also required to keep the AG's office updated on its antitrust compliance every year.
Last year, the DC attorney general filed a similar lawsuit against Amazon, accusing the company of fixing online retail prices.
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