Amazon has shut down its “Sold By Amazon” program after accusations of price fixing was levied by the Washington Attorney General.
The wave of antitrust action is continuing. Earlier, we reported on the explosive allegations against Google in the antitrust suits filed by a coalition of US states. Before that, there was the antitrust probe by the FTC looking into Amazon’s cloud computing services. Then, there’s the case against Apple by Dutch authorities over payment methods in the Apple App store. Another case is the FTCs antitrust suit against Facebook continuing. Suffice to say, it’s, at times, been difficult to keep up with it all.
Now, we are learning about even more action in the antitrust push against large tech companies. This time, Amazon is in the cross-hairs. At issue is the “Sold By Amazon program that was run between 2018 to 2020. This apparently is the source of antitrust allegations including price fixing. Amazon reportedly shut down the program following those allegations. From ABC:
Amazon will end its “Sold by Amazon” program after an investigation by Washington state’s attorney general found it was anticompetitive and violated antitrust laws, according to court documents filed Wednesday.
The company engaged in unlawful price fixing and unreasonably restrained competition to maximize its own profits via the program that set a minimum price for certain third-party products sold on the platform, according to the lawsuit and consent decree filed in King County Superior Court in Seattle.
The Seattle Times reported that as a result of the investigation, Amazon will shut down the program nationwide and pay $2.25 million to the attorney general’s office, as well as provide annual updates on its compliance with antitrust laws.
Through the program, third-party sellers entered into an agreement with Amazon that set a minimum payment rate for products sold on the platform, according to the lawsuit. If the sales exceeded the agreed upon minimum, Amazon would take a cut of the additional revenue.
The Times said a spokesperson for Amazon that the newspaper did not name said the company believes the program was legal and good for consumers. Amazon acted as the retailer and purchased products from suppliers to fill customer orders, ensuring low prices for consumers.
We know that accusations of price fixing, even if it ends in settlement, can really damage a company or organizations reputation for years. In 2002, the Recording Industry Association of America (RIAA) settled a price fixing lawsuit for $67.4 million. At the time, many file-sharers used the seemingly artificially high prices of music to justify downloading those songs online for free instead. While the case was settled clear back then, the accusations of overly high prices in music continued to be justification for downloading music through unauthorized sources for well over a decade since. Only recently has those memories of high prices started to fade.
So, the risk for Amazon here is that many people will look at their prices as being artificially high. That is potentially extremely damaging to the company. Combine this with the potential of countries imposing taxes on services like Amazon and that could represent a double threat to Amazon. The risk is that everyone thinks of Amazon as convenient, but expensive by default. It might be great news for smaller independent retailers, but they still have to battle the convenience of Amazon.
At any rate, add another point to the list of the antitrust drama of large tech companies these days.