It’s been quite a week for Amazon (AMZN). CEO Jeff Bezos announced the date he's stepping down, the company signed a deal to buy iconic Hollywood studio MGM — and it got hit with an antitrust lawsuit from Washington, DC., Attorney General Karl Racine.
That suit accuses Amazon of abusing its massive market power through oppressive contracts with its third-party sellers, and NYU Law professor Eleanor Fox told Yahoo Finance Live that the allegations in the case could be serious if they’re true.
“I think it’s a very strong case, because part of it is based on illegal agreements,” said Fox, an expert on antitrust and competition policy who earned her law degree from NYU 60 years ago.
The lawsuit, filed Tuesday, alleges that Amazon required third-party sellers on its e-commerce platform to sign contracts that prohibited them from selling their goods through other retailers at lower prices than on Amazon.com. Amazon’s third-party seller agreement included this clause until at least 2019, according to the suit.
“Amazon has a lot of exclusive agreements,” Fox explained. “The participants cannot offer a lower price than they offer on Amazon. [A Seller] can’t even offer a lower price on its own website.”
The AG claims that Amazon’s third-party seller agreements increased the price of retail items across the entire online marketplace, ultimately harming both everyday consumers and third-party sellers. Racine also accused Amazon of trying to “win at all costs,” a sentiment that Fox agreed with.
“Amazon punishes competitors wherever it can. It gets an edge because it has the power to get the edge,” said Fox.
The AG is seeking to prevent Amazon from continuing its alleged anticompetitive conduct, including through mandatory divestitures, if necessary, and by appointing a corporate monitor to ensure compliance with any court-imposed remedies.
Amazon, meanwhile, claims that the AG’s claims are backwards, and that the case may end up resulting in higher prices for consumers.
“Sellers set their own prices for the products they offer in our store. 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," an Amazon spokesperson told Yahoo Finance.
'A huge deal'
The suit came just a day before Amazon announced it is purchasing legendary Hollywood studio MGM for $8.45 billion.
The deal will allow Amazon to bolster its ability to take on competitors like Netflix (NFLX) and Disney+ (DIS) by giving the company’s Amazon Prime Video access to MGM’s 4,000 movies, including the “James Bond” franchise, and 17,000 TV shows.
Despite the antitrust cast in D.C., Fox said the MGM deal is unlikely to be blocked on such grounds.
“It looks like it’s a tough case to make that Amazon would be getting market power, say, in streaming, as a result of the merger,” she explained. “But this is such a huge deal, it may be that there is not a really strong traditional antitrust argument, but there certainly are important concerns.”
Amazon is facing a host of investigations both in the U.S. and abroad over its treatment of third-party sellers on its platform including claims that the company uses information about what products are most successful to create its own competing versions under its Amazon Basics brand.
When pressed on the topic by lawmakers during a 2020 Congressional hearing, Bezos said he couldn’t “guarantee” that Amazon employees have never used private data to inform its private label product decisions.
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