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

05/25/2021 | 11:53am EDT

By Ryan Tracy

WASHINGTON -- The District of Columbia filed an antitrust lawsuit against Amazon.com Inc. 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 sanctioned sellers who offer lower prices elsewhere, making the new policy an "effectively identical substitute," the lawsuit says.

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

Amazon said it doesn't feature what it considers to be overpriced items, but ending the agreements could cause it to do so, leading to higher prices for D.C. residents. Amazon sellers set their own prices, but the Amazon marketplace features products based on factors such as price and delivery speed, the company said.

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 other states to bring their complaints before a federal court.

Mr. Racine said other 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."

--John D. McKinnon contributed to this article.

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

(END) Dow Jones Newswires

05-25-21 1353ET

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