California’s Attorney General Rob Bonta has announced a lawsuit against Amazon. The state is suing Amazon, accusing the e-commerce giant of anticompetitive behavior in its dealings with third-party merchants.
According to a report in the Los Angeles Times, the result of this behavior on the part of the Seattle-based Amazon is continued market dominance.
The company is worth over a trillion dollars. It only got bigger during the coronavirus pandemic when people ordered all items online because of lockdowns and stayed home due to the fear of catching the virus. This allowed Amazon “to make increasingly untenable demands on its merchants and cost consumers more at checkout across California,” the complaint stated.
Violation of State Laws
Amazon has disputed Bonta’s characterization of the company and told the LA Times that sellers set their own prices for products they offer on Amazon and that Amazon offers low prices and “reserves the right not to highlight offers to customers that are not priced competitively.” A company spokesperson further said that the relief Bonta seeks would force Amazon to feature higher prices to customers, which would go against the core objectives of antitrust law.
Bonta’s office alleges that Amazon violated California’s Unfair Competition Law, which forms the legal basis for a wide range of consumer protection suits. The attorney general also alleges that Amazon violated the Cartwright Act, which is a state antitrust law. Third-party retailers and wholesalers have been required to enter into agreements with Amazon under which they have been prohibited from offering lower prices on other sites such as Wal-Mart, Target, and eBay.
In addition, they have also been barred from doing so through their own websites under their agreement with Amazon. In addition, merchants would have to compensate Amazon if other online outlets do offer better prices. Merchants who don’t comply with the terms of this agreement could face penalties such as less prominent listings and even the possibility of suspension or termination.
Bonta’s office points to data showing that merchants typically did not lower their Amazon prices in order to comply with the contracts but raised them elsewhere. Bonta is asking the court to bar Amazon from engaging in these contracts, to return “its ill-gotten gains” and account for the increased prices the people of California have had to pay as a result.
Recent Actions Against Big Tech
This is not the attorney general’s first action against Big Tech. In March, Bonta announced a nationwide investigation into TikTok for promoting its social media platform to children and young adults while its use is associated with physical and mental harm to youth. This investigation was to look into the harm using TikTok could cause to young people and what TikTok knew about those harms. The probe also focuses on the techniques used by the platform to boost young user engagement, including strategies or efforts to increase the duration of time spent on the platform and the frequency of engagement with the platform.
In November 2021, the AG announced a similar investigation against Meta over the harm caused by Instagram to youth. That probe, he said, would target the techniques used by Meta to increase engagement with youth. Bonta also said the investigation followed recent reports revealing that Meta’s own research shows using Instagram is associated with an increased risk of physical and mental harm to youth, including depression, eating disorders, and even suicide.
Now, the state is suing Amazon over its allegedly questionable practices.
What Are Antitrust Laws and Why Are They Important?
Antitrust laws are a system of California and federal state laws which bar unwarranted restraints on free and open competition in commerce. These laws essentially allow the Attorney General to bring forth civil and criminal legal actions against individuals and businesses acting in restraint of trade. District attorneys can bring similar actions for antitrust offenses centered in their respective counties. The law also provides that anyone who has been harmed by an antitrust offense can recover from the wrongdoer three times the damages they have suffered.
Antitrust offenses are important because they raise the prices paid by consumers for goods and/or services. When you are forced to illegally pay a higher price, it is the equivalent of money being stolen from your pocket. Even relatively minor price increases can have a tremendous cumulative effect statewide.
California’s consumers and the state’s economy itself could suffer as a result of the economic dislocations caused by antitrust offenses. It also affects the state’s residents directly because when state or local governments pay more for goods or services because of antitrust violations, either taxes must be raised or government services must be reduced.
Antitrust offenses are also bad for businesses. The cost of doing business affects the business’s bottom line. If the price of goods or services used by a business is raised by antitrust restraints, the cost of doing business increases.
Antitrust Lawsuits
These types of lawsuits are a valuable tool to stop practices that restrain trade and the free market. They also help compensate those who are harmed by antitrust offenses. These lawsuits can be filed individually, but many are class action cases because the number of people affected is usually significant.
For example, a group of consumers may bring an antitrust lawsuit because they were forced to pay excessively for a product or service due to the anti-competitive practices of a seller. Affected businesses may also be an antitrust lawsuit alleging that a company engaged in anticompetitive practices creating a monopoly in a particular industry. For more information on class action lawsuits and antitrust lawsuits, it is important that you contact an experienced California class action lawyer.
