Amazon to pay US$2.25M, fold its price-fixing plan

Amazon to pay US$2.25M, fold its price-fixing plan

After a lengthy price-fixing investigation by his office's Antitrust Division, Washington Attorney General Bob Ferguson announced that Amazon would pay US$2.25 million to his office and shut down its third-party seller program.

A resolution was filed in the King County Superior Court by Ferguson's office. Consent decrees are court orders that all parties have agreed to after settlement negotiations, so Amazon is obligated to abide by them. In return, Amazon will pay a multi-million dollar sum to the Antitrust Division to fund further investigations.

Over half of all Amazon sales currently come from third-party sellers. Amazon increased its profits from such sales with its "Sold by Amazon" program. Sellers negotiated with Amazon to provide them with a minimum profit while Amazon pocketed any additional profit. Amazon's algorithm, however, tracked low prices across other retailers.

According to the AG's office, the price-fixing allegations involve, among other things:

Despite artificially high prices for the vast majority of the remaining products enrolled in the "Sold by Amazon" program. Since Amazon's algorithm for pricing keeps the seller's pre-enrollment price as the floor price, the seller's pre-enrollment price stays the same. The result of this was that participating sellers had limited, if any, flexibility in lowering the price of their products unless they had withdrawn the products from the Sold by Amazon program. Despite Amazon's ability to maximize profits, many sellers were stuck with artificially high prices for their products.

There were no external prices or Amazon's own prices that could compete with the prices of their sellers in the program. As a result, sales decayed while Amazon still charged them for services like storage. Ferguson said, "Today's action will promote product innovation and consumer choice and increase competition for sellers throughout the country."

Further antitrust cases have been filed against Amazon in the Southern District of New York, USA, the European Union and the District of Columbia.