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Washington sues Amazon, alleging its policies lead to higher online prices everywhere

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The rise of Amazon and CEO Jeff Bezos 15:02

Washington, D.C.'s attorney general is suing Amazon on antitrust grounds, claiming the world's largest online retailer artificially inflates product prices online through the agreements it imposes on smaller sellers.

In a lawsuit filed in the District of Columbia court Tuesday, Attorney General Karl Racine takes aim at the e-commerce giant's contract provisions with third-party sellers, alleging they break the District's anti-monopoly laws.

Until 2019, Amazon banned sellers on its platform from selling items for a lower price outside of Amazon. That year, under increased scrutiny from lawmakers, Amazon changed its policy from an outright ban on lower prices elsewhere to a warning that companies who did offer lower prices outside of Amazon's platform could be demoted or banned from selling there, according to the suit. 

Despite the new wording, the effects of the policy remain the same, Racine alleged. Because Amazon charges high fees, approaching 40%, for sellers to use its marketplace, and because sellers can't raise their product prices on Amazon's site alone to offset those fees — without risking demotion, Amazon's policies result in higher online prices at retailers across the board.

"Far from enabling consumers to obtain the best products at the lowest prices, Amazon instead causes prices across the entire online retail sales market to be artificially inflated," the complaint states.

"Amazon restrains [sellers] from selling their products on any other online retail sales platform — including [sellers'] own platforms — at prices lower, or on better terms, than they offer their products on Amazon's online retail sales platform. This causes prices to consumers across the online retail sales market to be higher than they would be otherwise," according to the complaint.

Apart from raising prices, Amazon's policy also reduces choices for consumers, Racine alleged.

"This puts Amazon ahead of everyone else, and it reduces the ability for others to compete," he said on a call with reporters.

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In a statement, an Amazon spokesperson said the company's policies were like any other retail store's, and benefited shoppers.

"The DC Attorney General has it exactly backwards — sellers set their own prices for the products they offer in our store," the statement said. "Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively.  The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law."

Racine's allegations echo many of the findings from a House antitrust investigation into Amazon and three other tech giants. The committee last year found that Amazon "has monopoly power over most third-party sellers and many of its suppliers," and cited many sellers who said "they cannot turn to alternative marketplaces, regardless of how much Amazon may increase their costs of doing business or how badly they are treated."

The company is also facing scrutiny from the Justice Department and from European Union regulators.

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