Amazon Accused of Anticompetitive Practices in Class Action Lawsuit

Amazon, the biggest online retailer in Canada, has been hit with a proposed class action lawsuit accusing the company of conspiring with third-party sellers to fix retail e-commerce prices.

Lead plaintiff, Audrey Wells, claims that Canadian consumers have paid $12 billion due to anticompetitive agreements Amazon made with third parties to force consumers to pay a higher price for products sold on their online platform. According to the Amazon price fixing class action lawsuit, the scheme comes in two parts.

“First, Amazon and third-party sellers agreed on a most favoured nation provision (‘MFN’),” explains the proposed class action lawsuit. “The MFN provided that third-party sellers would not sell products to consumers on any e-commerce website for a price that was lower than the price charged to consumers on Amazon’s platform. As a tacit admission of its wrongdoing, Amazon withdrew the MFN in March 2019 in the face of a threatened antitrust investigation by the United States Federal Trade Commission (‘FTC’).”

Then, claims the complaint, Amazon requires third-party sellers to comply with a “fair pricing” policy. The policy prohibits third-party sellers to list products prices lower than on Amazon. Third-party sellers who violate the policy face high penalties, alleges the plaintiff.

“These anticompetitive agreements permit Amazon to shelter its online retail business from price competition,” alleges the complaint. “By limiting price competition, Amazon has maintained an illegal competitive advantage that has enabled it and the third-party sellers to sell products to consumers at higher than competitive prices.”

Further, Canadian consumers end up paying inflated prices for products on Amazon and are unable to fairly search for lower-cost alternatives under the anticompetitive agreements, claims the plaintiff.

Details of Amazon’s Allegedly Anticompetitive Agreements

According to the Amazon price fixing class action lawsuit, Amazon’s retail platform comes in two forms. The largest percentage of Amazon’s online sales come from third-party sellers who, for fees, are permitted to market and sell products on amazon.com and/or amazon.ca. The fees include a 15 percent commission on each item sold by third-party sellers on the platform, a registration fee, and a per-item fee or monthly subscription. Additionally, third-party sellers can opt to pay another fee to have Amazon ship orders, as well as handle returns and other customer services.

The Amazon price fixing class action lawsuit points out that third-party sellers are potential competitors of the online shopping company because they could choose to sell their products at a lower price somewhere else online. However, a “price parity” term of Amazon’s MFN provision allegedly forestalls these retailers from listing their products at lower prices elsewhere.

“In other words, Amazon and third-party sellers agreed – expressly and in writing – to limit price competition by setting a floor price based on the price at which the third-party sellers sell products on the Amazon platform,” explains the class action lawsuit. “This agreement was made between Amazon and the third-party sellers. This arrangement was also reached by the third-party sellers among each other by their jointly agreeing with Amazon to limit price competition on all e-commerce websites in accordance with the MFN.”

The Amazon price fixing class action lawsuit points to another provision Amazon requires its third-party sellers to agree to in order to sell products on their platform. The “Marketplace Fair Pricing Policy” (FPP) allegedly requires third-party sellers to maintain “pricing parities” to preserve “customer trust” in the Amazon website.

“The FPP states that ‘Amazon regularly monitors the prices of items on our marketplaces,’ and that if it sees ‘pricing practices’ on www.amazon.ca or www.amazon.com ‘that harm[] customer trust, Amazon may remove the Buy Box, remove the offer, or in serious or repeated cases, suspend or terminate selling privileges,’” points out the complaint.

“According to the FPP, one of the pricing practices that ‘harm customer trust’ is ‘[s]etting a price on a product or service that is significantly higher than recent prices offered on or off Amazon,’” continues the complaint.

Additionally, third-party sellers are required to pay a number of fees to sell on Amazon. These fees are “baked” into the price that the consumer pays, points out the complaint. Even if other online retailers offered use of their platforms for lower fees, third-party sellers could not sell their products for less than they are listed on Amazon under the terms of the two allegedly anticompetitive agreements.

“Amazon and third-party sellers are enriched through higher prices for the products they sell; Amazon is enriched through higher referral fees, and consumers are harmed,” contends the complaint.

The proposed Amazon anticompetitive agreements class action lawsuit seeks to represent Quebec residents who purchased products on Amazon since June 1, 2010. Additionally, the plaintiff seeks to represent Quebec residents who made online purchases on other websites since June 1, 2010.

Are you an Amazon customer? What do you think about their pricing practices? Tell us your thoughts in the comment section below!

The lead plaintiff and proposed Class Members are represented by Jean-Michel Boudreau of IMK LLP.

The Amazon Anticompetitive Agreements Class Action Lawsuit is Audrey Wells v. Amazon.com Inc., et al., in the Superior Court of Québec, District of Montreal, Canada. 

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