Amazon sued by California over ‘anticompetitive’ pricing policies

California has sued Amazon over claims it punishes third-party sellers who offer their products more cheaply on other websites, in the latest legal action against the $1.3tn tech giant by prosecutors and regulators in the US and Europe.

Rob Bonta, the state’s attorney-general, accused the ecommerce group of violating the state’s competition law by “severely penalising” sellers by reducing their prominence on product listing pages and search results if they offered lower prices on other platforms.

The complaint, which follows a more than two-year-long investigation, alleges that Amazon is able to strong-arm merchants into accepting onerous terms and higher selling fees on the marketplace due to its dominance of ecommerce in the US.

Bonta said the practice led to artificially higher prices across the board on stores such as Walmart and eBay, thereby protecting Amazon from the threat of increased competition.

The lawsuit is the latest in a litany of complaints against Amazon, several of which focus on the alleged control the company has over the millions of third-party sellers that list products on its marketplace. It also faces scrutiny over recent acquisitions, such as its $3.9bn purchase of healthcare company One Medical.

In July, Amazon offered to stop using the huge troves of data it gathers from third-party sellers to benefit its own retail business as part of a deal with Brussels to end two of the most high-profile EU antitrust probes.

However, a European Commission official told the Financial Times earlier this week that Amazon’s compliance with strict incoming competition laws was a “work in progress”.

“Amazon coerces merchants into agreements that keep prices artificially high, knowing full-well that they can’t afford to say no,” California’s attorney-general said in a statement accompanying the lawsuit, filed in San Francisco Superior Court on Wednesday.

California’s action follows a similar lawsuit from Washington, DC, attorney-general Karl Racine last year. In that case, however, a judge threw out the allegations, saying Racine’s office had not done enough to prove anti-competitive effects from Amazon’s policies. Last month, supported by the Department of Justice’s antitrust division, Racine filed an appeal in a bid to revive the action.

“The law and facts are on our side in this case, and on the side of DC residents,” Racine wrote on Twitter.

Prosecutors in California told the FT they were confident their 84-page filing, using information gathered by more than a dozen investigators, would sufficiently back up their claims. The investigation involved interviews with current and former Amazon employees.

The suit calls for the court to impose an order that would prohibit Amazon from punishing sellers who offer lower prices elsewhere online. It asks for unspecified damages to be paid to compensate consumers affected by increased prices and for Amazon to “return its ill-gotten gains and pay penalties” in order to deter other online retailers from pushing similar policies.

Amazon has previously pushed back against claims that its terms are unfair. Responding to the DC case, Amazon said merchants were free to set their own prices but that it reserved the right “not to highlight offers to customers that are not priced competitively”.

But Californian prosecutors argue that Amazon’s market share “leaves merchants with few options other than to accede to its demands”, citing one survey, from ecommerce management platform Feedvisor, that said 74 per cent of US consumers went directly to Amazon when looking to buy a specific product.

At issue is how Amazon decides to display certain third-party sellers in the “Buy Box”, the panel used by shoppers to confirm purchases. Demotion from the Buy Box severely limits a seller’s ability to attract sales.