DC AG expands Amazon lawsuit to include wholesaler pricing tactics

Karl Racine accused Amazon of making companies subsidize its sales.

SEATTLE, WA - MAY 20: A sign is seen outside of an Amazon Go store at the Inc. headquarters on May 20, 2021 in Seattle, Washington. Five women employees sued Amazon this week, alleging discrimination and retaliation. (Photo by David Ryder/Getty Images) (David Ryder via Getty Images)

Washington, DC Attorney General Karl Racine has filed an amended antitrust lawsuit against Amazon. He accused Amazon of strong-arming wholesalers that provide it with products into anti-competitive agreements and making them subsidize lower prices. Engadget has contacted Amazon for comment.

The AG contends that Amazon requires a guarantee from wholesalers that it will make a minimum profit when it buys and resells their products. Those deals enable Amazon to undercut competitors' pricing and force wholesalers to pay the difference for lost profit margins, according to court documents obtained by The Washington Post.

Racine claims that Amazon's Minimum Margin Agreement (MMA) prompts wholesalers to charge more for goods elsewhere to cover those costs, making it more difficult for other e-commerce platforms to compete against Amazon's prices. The MMA leads to higher prices and less choice for consumers, according to Racine, as well as reduced levels of competition and innovation among online marketplaces.

“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," Racine told Engadget in a statement. "As we further investigated Amazon’s anti-competitive practices that harm consumers and further entrench Amazon’s monopoly, we learned it was also engaging in anti-competitive agreements with first party sellers, or wholesalers – in addition to third-party sellers. I filed this antitrust lawsuit to stand up for consumers, hold Amazon accountable for its anti-competitive practices, and protect competition. We’re continuing to do just that with this amended complaint that adds more of Amazon’s misconduct.”

Others have accused Amazon of adopting such tactics. PopSockets CEO David Barnett previously testified that Amazon demanded payment from the company to make up for lost profits after it slashed prices.

In the initial version of his suit, which was filed in May, Racine claimed Amazon blocks third-party sellers from offering their wares at lower prices on other platforms. Amazon is facing antitrust scrutiny elsewhere, including from the House of Representatives, the Federal Trade Commission and the European Commission. Several state attorneys general are also said to be looking into whether the company has broken antitrust laws.

Update 9/13 12:18PM ET: Added Racine's statement and other clarifications.