Amazon shuts down 'Sold by Amazon' program to appease price-fixing probe

Amazon allegedly enticed third-party sellers into a program that forced them to sell items at 'artificially high levels' thereby making it harder to make sales.
Written by Campbell Kwan, Contributor
Image: Getty Images

Amazon is shutting down its "Sold by Amazon" program to settle a price-fixing investigation conducted by the Washington Attorney-General Bob Ferguson that accused the company of acting anticompetitive and violating antitrust laws.

According to the Washington Attorney General's Office, Amazon engaged in unlawful price fixing and unreasonably restrained competition to maximise its own profits.

The "Sold by Amazon" program ran from 2018 to 2020, with Amazon enticing third-party sellers into joining the program by guaranteeing an agreed upon minimum payment for sales of their consumer goods. If the sales exceeded the agreed upon minimum payment, Amazon would take a cut of the additional revenue.  

Ferguson explained that the program was anticompetitive as enrolled sellers were forced to increase their prices to "artificially high levels" by Amazon to stay in the program. This meant participating sellers had limited, if any, ability to lower the price of their products without withdrawing their product's enrollment in the program.

As a result, when prices increased, some sellers experienced a marked decline in sales and resulting profits for products enrolled in the program. Faced with price increases, online customers sometimes opted to buy Amazon's own branded products, resulting in Amazon maximising its own profits regardless of whether consumers paid a higher price for sales of products enrolled in the "Sold by Amazon" program or settled for buying the same or similar product offered through Amazon, Ferguson said.

At the same time, sellers in the program continued to bear the risk of having their products not sell in a timely manner, or at all, while paying Amazon for storage fees of their enrolled products.

"Consumers lose when corporate giants like Amazon fix prices to increase their profits," Ferguson said. "Amazon unreasonably restrained competition in order to maximise its own profits off third-party sales. This conduct constituted unlawful price-fixing."

To settle the investigation, Amazon has agreed to shut down the "Sold by Amazon" program nationwide and provide the Attorney General's Office with annual updates on its compliance with antitrust laws.

Amazon will also pay $2.25 million to the Attorney General's Office that will be used to support its antitrust enforcement which does not receive general fund support.

This is not the first time Amazon has been accused of acting anticompetitively, with the European Union at the end of 2020 filing its first ever antitrust lawsuit against the company for allegedly using data it collected from third-party sellers on its marketplace to determine what products to launch and how to price them. 

Amazon also received another antitrust lawsuit last year, this time from District of Columbia Attorney General Karl Racine, on allegations it fixed its online retail prices through contract provisions and policies signed by third-party sellers.

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