Amazon drives up the prices you pay

Coercive Price Fixing

By Philip Mattera, director of the Corporate Research Project of Good Jobs First for the Dirt Diggers Digest

In its early days, Amazon.com cultivated a reputation for low prices, which helped put a lot of small booksellers out of business. That eventually gave way to a business model based on a wide product selection and speedy delivery. 

Its Prime subscription system was designed to make customers focus on the benefits of free shipping and overlook the fact that the prices of the products were not much of a bargain.

Now the giant e-retailer is facing allegations that it not only abandoned the low-cost approach but actually conspired to raise the prices charged on its own platform as well as those of its competitors.

California Attorney General Rob Bonta brought a price-fixing lawsuit against Amazon in February and has just provided new details of the alleged conspiracy in a motion filed in state court in San Francisco. 

The document claims that when a competing platform is offering a product at a price lower than it is charging, Amazon demands that the supplier intervene to get that price increased: “Vendors, cowed by Amazon’s overwhelming bargaining leverage and fearing punishment, comply—agreeing to raise prices on competitors’ websites (often with the awareness and cooperation of the competing retailer) or to remove products from competing websites altogether. The scheme is neither subtle nor complex. It is price fixing, and it should be immediately enjoined.”

The pressure exerted by Amazon is said to be a part of a system called Can’t Realize a Profit, or CRaP, in which it cuts off orders from suppliers that don’t comply with the company’s demands.

What is notable about the California AG’s motion is that it include details on specific vendors that were said to have gotten caught up in the price fixing. For example, it quotes an email from GlobalOne Pet Products, a producer of premium pet treats, to the big pet supplies website Chewy urging it to coordinate a price increase with Amazon.

In another example, Amazon was said to have threatened to stop ordering goods from a home décor vendor called All the Rages until it arranged for price increases on the Home Depot website.

Amazon’s alleged pressure tactics were not limited to small suppliers. The motion accuses the company of leaning on Levi Strauss to get Walmart.com to boost the prices of Easy Khaki Classic pants.

The California AG obtained many communications by Amazon employees alluding to these practices. But the motion claims that those documents do not reflect the true extent of the conspiracy, given that the discovery process is said to have yielded materials advising staffers to arrange things with vendors on the phone rather than in writing.

Among the nearly 200 entries Amazon has in Violation Tracker representing nearly $3 billion in penalties, there is only one case involving price fixing—a 2022 action brought by the Washington AG which Amazon settled for $2.25 million.

Given the impressive evidence collected by the California AG, it seems likely that Amazon’s price-fixing rap sheet will soon be much more substantial.