The state of California sued Amazon on Wednesday, accusing the company of stifling competition and artificially raising prices by forcing sellers into anti-competitive contracts.

Amazon, the complaint alleged, requires merchants to enter into agreements that come with severe penalties if a merchant sells products on competing sites at a lower rate than they do on Amazon’s platform. Those competitors include other e-commerce sites like Walmart, Target and eBay as well as, in some cases, the merchant’s own website. 

If a seller violates that agreement, it risks sanctions like less-prominent listings or suspension of the Amazon account. With more than 160 million Prime members, Amazon has become a dominant force in the e-commerce industry, and many sellers say they don’t want to risk missing out on exposure and sales from the platform. 

With that market dominance, Amazon has raised prices and fees for sellers — while stifling their ability to offer lower rates on other platforms, California Attorney General Rob Bonta said. 

“For years, California consumers have paid more for their online purchases because of Amazon’s anti-competitive contracting practices,” Bonta said in a statement. “Amazon coerces merchants into agreements that keep prices artificially high, knowing full well that they can’t afford to say no.” 

A spokesperson for Amazon said Bonta has “it exactly backwards.” Sellers set their own prices and Amazon “takes pride” that it offers low prices across a broad selection. 

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“Like any store we reserve the right not to highlight offers to customers that are not priced competitively,” the spokesperson said. “The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”

Amazon is already under federal scrutiny for its business practices. The Federal Trade Commission opened an investigation in March 2021 into Amazon Prime, focusing on the process for signing up and canceling the subscription service, to look at whether it violated consumer protection laws. At the same time, the House antitrust subcommittee is investigating whether Amazon used company data about its consumers to advance the sale of its own private-label products over those of third-party vendors.

The House Judiciary Committee has asked the Department of Justice to investigate Amazon and some of its executives for criminal obstruction, for refusing to turn over information and lying about how the company treats third-party sellers. 

Last month, Amazon moved to block parts of the FTC’s investigation, arguing the regulatory agency is making “unworkable and unfair” requests and harassing founder Jeff Bezos and CEO Andy Jassy.

Earlier this year, Amazon shut down its “Sold by Amazon” program after an investigation from Washington Attorney General Bob Ferguson found it was anti-competitive and violated antitrust laws. The company engaged in unlawful price fixing and unreasonably restrained competition in order to maximize its own profits, according to the lawsuit and consent decree filed in King County Superior Court. 

Bonta is asking the San Francisco Superior Court for an order that stops Amazon’s anti-competitive behavior and recovers the damages to California and the California economy. 

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“The reality is: Many of the products we buy online would be cheaper if market forces were left unconstrained,” Bonta said. “With today’s lawsuit, we’re fighting back. We won’t allow Amazon to bend the market to its will at the expense of California consumers, small business owners and a fair and competitive economy.”

The lawsuit echoes a case brought by Karl A. Racine, the attorney general for the District of Columbia, that was thrown out this spring. Judge Hiram E. Puig-Lugo of the Superior Court of the District of Columbia found Racine did not provide sufficient evidence showing Amazon’s policies were anti-competitive. Racine is appealing the ruling.

Most of Amazon’s sales — 57% of units last quarter — are of products offered by third-party merchants on its website. The sellers pay Amazon a referral fee to list their products, and often pay for Amazon’s fulfillment services, advertising and other offerings. Amazon collected more than $100 billion in third-party service fees in the last 12 months, according to its financial filings.

Seattle Times wire service material is included in this report.