Attorney General for the District of Columbia Karl A. Racine on Tuesday filed an antitrust lawsuit against Amazon, alleging the online retail giant's "anticompetitive practices" have raised prices for consumers and stifled innovation.
"Amazon has used its dominant position in the online retail market to win at all costs. It maximizes its profits at the expense of third-party sellers and consumers, while harming competition, stifling innovation, and illegally tilting the playing field in its favor," Racine said in a statement.
The lawsuit, filed in DC Superior Court, alleges that Amazon fixed online retail prices through contract provisions and policies, known as "most favored nation" agreements, which prevent third-party sellers that offer products on Amazon.com from offering their products at lower prices or on better terms on any other online platform, including their own websites.
These agreements effectively require third-party sellers to incorporate the high fees charged by Amazon -- as much as 40 percent of the total product price -- not only into the price charged to customers on Amazon's platform, but also on any other online retail platform, the complaint noted.
Amazon, however, refuted those accusations, saying that sellers set their own prices.
"The DC Attorney General has it exactly backwards -- sellers set their own prices for the products they offer in our store," an Amazon spokesperson was quoted by CNBC as saying in a statement, noting that the relief the attorney general seeks would force Amazon to feature higher prices to customers.
In an earlier statement released a few months ago, Amazon argued that large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is "simply wrong," adding that "those fallacies are at the core of regulatory spit-balling on antitrust."
Amazon is the world's largest online retailer, controlling 50-70 percent of online market sales in the United States, and more than 2 million independent third-party sellers rely on Amazon Marketplace, according to the complaint.
In 2019, Amazon claimed to have removed its price parity policy that explicitly prohibited third-party sellers from offering their products on a competing online retail sales platform at a lower price or on better terms than offered on Amazon, but the online retail giant quickly and quietly replaced the price parity policy with an "effectively-identical substitute," its fair pricing policy, the complaint noted.
Under the revised policy, third-party sellers can be sanctioned or removed from Amazon altogether if they offer their products for lower prices or under better terms on a competing online platform.
The lawsuit comes months after antitrust lawsuits were filed against Google and Facebook. In October last year, the US Justice Department, along with more than 10 state attorneys general, filed an antitrust lawsuit accusing Google of "unlawfully maintaining monopolies" in the search and search advertising markets.
In December, the US Federal Trade Commission, with a coalition of attorneys general of over 40 states and the District of Columbia, filed a lawsuit against Facebook, accusing it of forming an illegal monopoly through years of anticompetitive practices.
The lawsuit against Amazon, however, was not filed by federal regulators, and was not in coordination with other state attorneys general.
Tech giants have been facing growing scrutiny in recent years. After a 16-month investigation into Apple, Amazon, Facebook and Google, the antitrust subcommittee under the House Judiciary Committee released a report in October last year, arguing that the four Big Tech companies enjoy monopoly power and need more government regulation.
Big Tech lobbying and campaign spending soared during the 2020 election cycle, and Facebook and Amazon are now the two biggest corporate lobbying spenders in the country, according to a recent report by consumer rights advocacy group Public Citizen.
As Amazon faces an antitrust lawsuit, Public Citizen -- along with other public interest groups -- on Tuesday gathered in front of Facebook's federal lobbying headquarters in downtown Washington D.C. to demand accountability for the company's litany of abuses, including "improper political interference, privacy violations, egregious data security lapses" and markets monopolization.
Aside from antitrust scrutiny, Big Tech is also accused of tax avoidance. At a congressional hearing in late March, Democratic Senator Elizabeth Warren lashed out at giant corporations like Amazon, saying that they report huge profits to their shareholders, but exploit loopholes and tax havens to pay close to nothing in taxes.
President Joe Biden recently nominated Columbia University Law School professor Lina Khan, a vocal critic of Big Tech, to the Federal Trade Commission, signaling the administration's tough stance on large tech regulation. Biden has already named another Columbia law professor, Timothy Wu, also an outspoken advocate for aggressive antitrust enforcement against tech giants, to join the National Economic Council.