Amazon antitrust class action over third-party restrictions trimmed but to move forward

(March 24, 2020)

A class action lawsuit has been filed against Amazon claiming the online retailer doesn’t allow third-party sellers to market lower prices on other websites in violation of antitrust laws.

Plaintiffs Deborah Frame-Wilson and Christian Sabol claim the retail giant illegally controls the pricing of third-party sellers on their platform.

Frame-Wilson says she is a regular shopper of online items such as household goods, children’s toys and children’s clothing. She claims that she typically compares prices on different online stores and has found that various retail prices are comparable to Amazon’s pricing, when taking shipping into account.

The plaintiff allegedly purchases products from online stores such as Fanatics.com, QVC and Walmart.com, as well as Amazon. Frame-Wilson notes that some of the items on other websites are available on Amazon.com.

According to the Amazon class action, Frame-Wilson purchased a DVD online from Walmart for $9.99, which is a price equal to the same item being sold on Amazon.com. The plaintiff claims that Amazon’s anticompetitive policies prevent the item from being offered at a lower market price.

Frame-Wilson alleges that she has been financially injured and will continue to be injured by paying more for certain products that she would have paid less for, if it was not for Amazon’s illegal policies.

The Amazon class action lawsuit avers that when a third-party seller registers with the Amazon marketplace, they must agree with the terms of the Amazon Services Business Solutions Agreement (BSA) and the policies that are inherent in the agreement.

Until recently, the BSA included a platform most favored nation provision, where Amazon governed the price of products that were being sold on the company’s marketplace, the plaintiff maintains.

However, in March 2019, the Federal Trade Commission (FTC) opened an investigation regarding the practices at Amazon. As a result, the retail giant withdrew this provision from the BSA, which prohibited third-party sellers from marketing their products at a lower price on other online platforms, according to the plaintiffs.

That said, the customers allege that Amazon is continuing to enforce the policy under the “fair pricing” provision in the BSA which severely penalizes sellers who offer lower prices outside of the Amazon platform.

Under the “fair pricing” provision, any single item must have a price that is equal or lesser to the price of the same item being sold on other online marketplaces, according to the Amazon class action lawsuit.

“It costs less to sell on eBay or the sellers’ own websites, but because of Amazon’s anti competitive price policies, its third-party sellers are prevented from lowering their prices to online customers reached outside the Amazon.com platform,” the plaintiffs state.

The customers argue that Amazon is engaging in a pricing scheme that broadly impacts all of the products being sold in the U.S. online marketplace.

Amazon sells more than 12 million products on its platform, whereas third-party sellers account for 600 million products on the platform, which collectively accounted for 49.1 percent of the total U.S. retail e-commerce market in 2018, according to the plaintiffs.

The Amazon shoppers allege that third-party sellers account for 68 percent of the sales revenue on the Amazon platform, or one-third of the revenue of the entire U.S. retail commerce market.

“Plaintiffs and Class members overpaid for Class Products because Amazon prevents its third-party sellers from competing on price outside the Amazon.com platform,” the Amazon class action lawsuit states.

The plaintiffs claim that Amazon has engaged in horizontal price-fixing with its 2 million third-party sellers, with respect to the products offered on the Amazon platform. The sellers reportedly have agreed to comply with Amazon’s pricing policies, which allow these sellers to offer supracompetitive prices of products on competing retail channels.

The Amazon class action alleges that the horizontal price-fixing agreement with its sellers benefits Amazon, as it attracts more customers to the platform and avoids head-to-head competition between Amazon and other retail establishments, such as Ebay.

The shoppers maintain that Amazon’s policies hurt consumers. They claim that if it it weren’t for Amazon, the ecommerce market prices for the products sold by its third-party sellers would be much cheaper.

“Amazon controls not only the prices that its two million third-party sellers set for their products on websites, apps, or platforms that compete with the Amazon.com platform, it also exercises a significant level of control over the flow of available information to consumers on the internet,” according to the plaintiffs.

Do you purchase products from Amazon and feel the pricing is unfair? Leave a message in the comments section below.

The plaintiffs are represented by are represented by Steve W. Berman and Barbara A. Mahoney of Hagens Berman Sobol Shapiro LLP and Derek W. Loeser of Keller Rohrback LLP.

The Amazon Antitrust Class Action Lawsuit is Frame-Wilson, et al. v. Amazon.com Inc., Case No. 2:20-cv-00424, in the U.S. District Court for the Western District of Washington.