California sued Amazon on Wednesday, accusing the company of pushing sellers and suppliers into anticompetitive deals that lead to higher prices, including at rival online stores.
The lawsuit, filed by state Attorney General Rob Bonta, focuses on the way Amazon — the largest online retailer — deals with third-party merchants, who account for most of the sales on the platform.
California alleges that Amazon penalizes sellers and suppliers that offer cheaper prices elsewhere on the internet, including Walmart and Target, for example by displaying their items lower or less prominently or outright blocking their new postings.
"Amazon makes consumers think they are getting the lowest prices possible," the lawsuit alleges, "when in fact, they cannot get the low prices that would prevail in a freely competitive market because Amazon has coerced and induced its third-party sellers and wholesale suppliers to enter into anticompetitive agreements on price."
California's antitrust lawsuit is among the biggest legal challenges to Amazon in recent years, as lawmakers and regulators in the U.S. and abroad have investigated the retail giant for potential anticompetitive practices.
An Amazon spokesperson denied any antitrust violations, pointed out that a similar case in the District of Columbia was dismissed, and said the California Attorney General has it backwards.
"Sellers set their own prices for the products they offer in our store," the company said in a statement. "Like any store we reserve the right not to highlight offers to customers that are not priced competitively."
California also accuses Amazon of creating a "vicious anticompetitive cycle": Sellers view Amazon as a must; Amazon charges them higher fees to be able to sell on its platform; Sellers, in turn, raise their Amazon prices. And, even though it costs them less to sell on other websites, Amazon's policies push sellers to raise prices on those sites, too.
"Through its illegal actions, the, quote, "everything store" has effectively set a price floor, costing Californians more for just about everything," Bonta said at a press conference on Wednesday.
In that case, Amazon argued its deals with merchants were meant to prevent shoppers from being overcharged, and punishing Amazon would hurt consumers.
Amazon has separately proposed a settlement with European antitrust regulators, who charged the company with violating competition laws. Their key allegations accused the company of using data it collected from third-party sellers to its own benefit.
Editor's note: Amazon is among NPR's recent financial supporters.