Amazon abuses dominance to keep wholesaler prices high, says DC AG in updated antitrust complaint

Minimum Margin Agreement policy is anticompetitive, it is claimed


Amazon has been accused of pressuring wholesalers into selling goods at inflated prices on rival marketplaces through anticompetitve agreements, thus unfairly cementing its market dominance.

The allegations were made in an amended antitrust complaint that was first filed in May by Washington DC’s Attorney General Karl Racine and widened this week.

In his updated lawsuit [PDF], Racine stated Amazon requires wholesalers, aka first-party sellers, to sign Minimum Margin Agreements before they supply goods to the web titan to resell on its marketplace.

These agreements, it is said, set the minimum amount of profit Amazon expects to receive from reselling the items. The wholesalers must make up the difference if Amazon fails to get the agreed minimum amount of margin from people's purchases, it is claimed. The prices of these products for shoppers can be varied by Amazon, according to the lawsuit.

And here's the genius part. Wholesalers are thus effectively strong-armed into charging prices on other e-commerce platforms that match or are higher than the prices on Amazon – otherwise, if these other platforms are able to undercut Amazon, and the web titan ultimately fails to make its agreed profit for whatever reason, such as by lowering its own prices, the wholesalers will be left picking up the bill, the lawsuit alleged.

In other words, it's in the interests of the first-party sellers (FPSs) to keep their prices up to avoid breaking their margin commitments with Amazon, which may just be a little unfair, the lawsuit contended.

“Indeed, FPSs have raised their prices to competing online marketplaces to prompt the maintenance of higher prices on those marketplaces and even asked those marketplaces to raise prices to online consumers to avoid triggering Amazon’s minimum margin protection,” the amended suit, first reported by the Washington Post, claimed.

“These agreements reduce other online marketplaces’ ability to compete with Amazon by offering lower prices to consumers.”

All in all, the effects of the Minimum Margin Agreement are anticompetitive for businesses and inflate prices for customers, it claimed.

In the initial filing to the Superior Court of the District of Columbia, Racine alleged Amazon bans businesses known as third-party sellers from peddling their products for lower prices on competing e-commerce sites. The internet titan fines traders for trying to undercut Amazon, and they are required to pay fees and extra charges that can rack up to 40 per cent of the price tag of listed products, it is alleged.

Racine wants the US capital's courts to force Amazon to end any anticompetitive policies, and to order it to pay fines and damages to shoppers under antitrust law.

In a statement, Racine said: "Amazon has continued to use its dominant position as an online marketplace to rig the system, leading to higher prices for consumers, and less competition among online marketplaces."

Amazon, meanwhile, insisted "sellers set their own prices for the products they offer in our store," and claimed the Attorney General's claims were "exactly backwards." ®

Similar topics


Other stories you might like

  • Lonestar plans to put datacenters in the Moon's lava tubes
    How? Founder tells The Register 'Robots… lots of robots'

    Imagine a future where racks of computer servers hum quietly in darkness below the surface of the Moon.

    Here is where some of the most important data is stored, to be left untouched for as long as can be. The idea sounds like something from science-fiction, but one startup that recently emerged from stealth is trying to turn it into a reality. Lonestar Data Holdings has a unique mission unlike any other cloud provider: to build datacenters on the Moon backing up the world's data.

    "It's inconceivable to me that we are keeping our most precious assets, our knowledge and our data, on Earth, where we're setting off bombs and burning things," Christopher Stott, founder and CEO of Lonestar, told The Register. "We need to put our assets in place off our planet, where we can keep it safe."

    Continue reading
  • Conti: Russian-backed rulers of Costa Rican hacktocracy?
    Also, Chinese IT admin jailed for deleting database, and the NSA promises no more backdoors

    In brief The notorious Russian-aligned Conti ransomware gang has upped the ante in its attack against Costa Rica, threatening to overthrow the government if it doesn't pay a $20 million ransom. 

    Costa Rican president Rodrigo Chaves said that the country is effectively at war with the gang, who in April infiltrated the government's computer systems, gaining a foothold in 27 agencies at various government levels. The US State Department has offered a $15 million reward leading to the capture of Conti's leaders, who it said have made more than $150 million from 1,000+ victims.

    Conti claimed this week that it has insiders in the Costa Rican government, the AP reported, warning that "We are determined to overthrow the government by means of a cyber attack, we have already shown you all the strength and power, you have introduced an emergency." 

    Continue reading
  • China-linked Twisted Panda caught spying on Russian defense R&D
    Because Beijing isn't above covert ops to accomplish its five-year goals

    Chinese cyberspies targeted two Russian defense institutes and possibly another research facility in Belarus, according to Check Point Research.

    The new campaign, dubbed Twisted Panda, is part of a larger, state-sponsored espionage operation that has been ongoing for several months, if not nearly a year, according to the security shop.

    In a technical analysis, the researchers detail the various malicious stages and payloads of the campaign that used sanctions-related phishing emails to attack Russian entities, which are part of the state-owned defense conglomerate Rostec Corporation.

    Continue reading
  • FTC signals crackdown on ed-tech harvesting kid's data
    Trade watchdog, and President, reminds that COPPA can ban ya

    The US Federal Trade Commission on Thursday said it intends to take action against educational technology companies that unlawfully collect data from children using online educational services.

    In a policy statement, the agency said, "Children should not have to needlessly hand over their data and forfeit their privacy in order to do their schoolwork or participate in remote learning, especially given the wide and increasing adoption of ed tech tools."

    The agency says it will scrutinize educational service providers to ensure that they are meeting their legal obligations under COPPA, the Children's Online Privacy Protection Act.

    Continue reading
  • Mysterious firm seeks to buy majority stake in Arm China
    Chinese joint venture's ousted CEO tries to hang on - who will get control?

    The saga surrounding Arm's joint venture in China just took another intriguing turn: a mysterious firm named Lotcap Group claims it has signed a letter of intent to buy a 51 percent stake in Arm China from existing investors in the country.

    In a Chinese-language press release posted Wednesday, Lotcap said it has formed a subsidiary, Lotcap Fund, to buy a majority stake in the joint venture. However, reporting by one newspaper suggested that the investment firm still needs the approval of one significant investor to gain 51 percent control of Arm China.

    The development comes a couple of weeks after Arm China said that its former CEO, Allen Wu, was refusing once again to step down from his position, despite the company's board voting in late April to replace Wu with two co-chief executives. SoftBank Group, which owns 49 percent of the Chinese venture, has been trying to unentangle Arm China from Wu as the Japanese tech investment giant plans for an initial public offering of the British parent company.

    Continue reading
  • SmartNICs power the cloud, are enterprise datacenters next?
    High pricing, lack of software make smartNICs a tough sell, despite offload potential

    SmartNICs have the potential to accelerate enterprise workloads, but don't expect to see them bring hyperscale-class efficiency to most datacenters anytime soon, ZK Research's Zeus Kerravala told The Register.

    SmartNICs are widely deployed in cloud and hyperscale datacenters as a means to offload input/output (I/O) intensive network, security, and storage operations from the CPU, freeing it up to run revenue generating tenant workloads. Some more advanced chips even offload the hypervisor to further separate the infrastructure management layer from the rest of the server.

    Despite relative success in the cloud and a flurry of innovation from the still-limited vendor SmartNIC ecosystem, including Mellanox (Nvidia), Intel, Marvell, and Xilinx (AMD), Kerravala argues that the use cases for enterprise datacenters are unlikely to resemble those of the major hyperscalers, at least in the near term.

    Continue reading

Biting the hand that feeds IT © 1998–2022