Ever wonder why products on Amazon are sometimes cheaper than on other websites? Turns out, it might be because of a widespread price-fixing scheme. According to California Attorney General Rob Bonta, Amazon allegedly pressured brands to increase the prices for their products on other retailers’ websites so that Amazon would have a more competitive price.
The allegations, which were made in a filing that is part of California’s ongoing antitrust lawsuit against Amazon and was unsealed on Monday, lay out a scheme in which Amazon used the leverage of its massive e-commerce platform to pressure companies into raising prices with other retailers or face punishment for failing to do so.
Per Bonta, the method of coercion starts with Amazon demanding a vendor “fix,” “correct,” “increase,” “raise,” or “look into” the prices of products on other retailers’ websites. The expectation is that the vendor will ultimately raise its prices everywhere but Amazon. To get that outcome, Amazon would allegedly threaten to punish the brand by restricting their advertising, demanding they pay compensation, or removing their products from Amazon altogether.
Bonta’s office alleges that Amazon’s price-fixing campaign took three different approaches: making a vendor agree to a price increase and forcing other retailers to match; making other retailers increase their price first so that Amazon can match the higher price on its own platform; or making a vendor remove a product from a competing retailer who sells said product at a lower price than Amazon, at which point Amazon will raise the price since no competitor is keeping the cost down.
While one might think that Amazon used this strong-arm technique on small retailers with little leverage of their own, Bonta’s office discovered several big brands getting pushed around by Bezos’s baby. Levi’s and Hanes both allegedly got squeezed by the price-fixing scheme, as did major pharmaceutical company Allergan and pet food giant GlobalOne.
The filings have some communications between Amazon and brands that seem pretty damning. For instance, after Amazon complained to a vendor called Agrothrive that its products were cheaper on Home Depot’s website, the vendor contacted Home Depot and then confirmed to Amazon, “just got out of a meeting with the Home Depot manager and she has agreed to raise the prices this time.” That certainly seems like a pretty explicit example of price fixing, but that’ll be for the court to decide when the case goes to trial next year.
“The evidence we’ve uncovered is clear as day: Amazon is working to make your life more unaffordable. The company is price fixing, colluding with vendors and other retailers to raise costs for Americans beyond what the market requires — beyond what is fair,” Attorney General Bonta said in a statement. “Amid a crisis of affordability, Amazon is illegally working to rake in profits by making sure consumers have nowhere else to turn to for lower prices. We’ll see them in court.”
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