Washington DC Attorney General Accuses Amazon of Raising Prices with Monopolistic Practices

By Lauren Feiner and Annie Palmer - CNBC

Washington DC Attorney General Karl Racine announced Tuesday that he will sue Amazon for alleged monopoly practices, alleging that the company unfairly increases the prices of some products and thus destroys innovation. 

Racine seeks to end

Amazon's

allegedly illegal use of pricing agreements

to take advantage of its competitors, obtain damages, and impose penalties to deter similar conduct.

The lawsuit asks the court to end Amazon's ability to harm competitors through a series of rectifications, as necessary, which could include structural measures.

Shares of Amazon changed only slightly after the announcement, down 1% on Tuesday morning.

The lawsuit, filed in the Superior Court of the District of Columbia, contends that Amazon

illegally maintained a monopoly

by using contractual provisions to prevent other sellers on its platform from offering their products at lower prices elsewhere.

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The attorney general maintains that the contracts create an

"artificially high price floor

across the entire online retail market," according to a press release, and these deals ultimately hurt both consumers and affiliated merchants by reducing competition. , innovation and choice.

Amazon requires sellers who want to do business in the online marketplace to

abide by its business solutions agreement.

Until 2019, Amazon included a clause in that document, called the "price parity provision," that prohibited sellers from offering their products in a competing online marketplace at a lower price than their products were sold on Amazon.

Amazon quietly removed that provision in March 2019 amid mounting antitrust scrutiny.

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But, according to the lawsuit, after Amazon removed that provision, it added a nearly identical clause called its "

fair pricing policy,

" which allows it to "impose penalties" on a seller who offers their product at a lower price in a market in competition line.

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Amazon's third-party marketplace, made up of millions of merchants, has become a critical part of Amazon's electronic trading business.

The market now accounts for more than half of Amazon's total sales.

Amazon's pricing deals were also a subject of scrutiny in the broad, more than 400-page report from the House of Representatives judicial subcommittee on antitrust, released last fall.

Lawmakers agreed that Amazon uses its

dominant position in e-commerce to

influence third-party sellers, to require them to adhere to the

most-favored-nation

clauses

.

Racine said his lawsuit focuses on the so

-

called

most-favored-nation

deals

because he sees them as "a policy that clearly

leads to higher prices

."

"We know those clauses are under the law, especially when a company like Amazon has monopoly power," Racine said, "and we know that Amazon has been criticized for those kinds of clauses in the past."

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The lawsuit comes months after federal and state authorities

filed antitrust complaints against Google and Facebook

.

Both lawsuits involved large coalitions of states coming together to present them, but Tuesday's action comes from Racine's office alone.

The attorney general said in a call with reporters that the main focus of the lawsuit, the

most-favored-nation

settlements

, was an issue that he felt his office could take over.

It is common for states to work together or with federal authorities on antitrust claims, especially those involving resource-rich companies, due to the large amount of work involved in

filing these lawsuits

.

But Racine said the topic of the

most-favored-nation

deals

is "specific enough" that his office can deal with it alone.

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Still, he did not rule out the possibility of

other states or federal authorities getting involved

, saying that it is customary for others to join in or file their own lawsuits once a state files it.

But he did not indicate that he was aware of such plans.

Amazon did not immediately respond to a request for comment.