By Stephanie Flynn
California Attorney General Rob Bonta (A.G. Bonta) filed a Complaint against Amazon.Com, Inc. (Amazon) in San Francisco Superior Court claiming the tech company violated California’s Cartwright Act and California’s Unfair Competition Law.[1] A.G. Bonta believes the lawsuit has a good chance of success despite the dismissal of a nearly identical claim brought by Washington D.C. Attorney General Karl Racine (A.G. Racine) against Amazon in the Superior Court of the District of Columbia.[2] A.G. Bonta believes California’s pro-consumer state laws distinguish California from D.C. and will result in a favorable outcome for California.[3]
The Complaint filed by A.G. Bonta claims that Amazon’s market power gives it the ability to coerce third party sellers and wholesalers into agreeing to contractual provisions that promote anticompetitive conduct.[4] The Complaint alleges Amazon’s Retail Price Parity agreements are anticompetitive in nature because they require sellers to sign a Business Solutions Agreement, forcing sellers to agree to Amazon Marketplace’s “Program Policies.”[5] Program policies include agreeing to Retail and Wholesale Price Parity Provisions.[6] These contractual provisions prohibited retail sellers and wholesalers from listing their products for a lower price than their Amazon-listed price on any other channel of sale.[7]
The Complaint claims the price parity agreements are anticompetitive because they allow Amazon to insulate itself from competition, place barriers to entry, charge higher prices to consumers, and prevent consumers from benefiting from the full output of low prices across online retail stores that they would experience in a freely competitive market.[8] A.G. Bonta claimed Amazon’s anticompetitive practices have effectively set a price floor costing both California retailers and consumers money.[9] California’s Complaint claims Amazon violated the state’s Cartwright Act.[10] The Cartwright Act is consumer friendly because it prohibits trusts from creating restrictions in trade or commerce.[11] California’s Business and Professional Code defines a “trust” as a “combination of capital . . . or acts by two or more persons” and prevents trusts from creating restrictions in trade or commerce; increasing the price of any commodity; preventing competition; and fixing prices.[12] He believes this lawsuit is important to combat the severe and far-reaching implications Amazon’s market power and coercive pricing tactics have on consumers.[13]
California state law may result in a successful lawsuit despite the dismissal of a nearly identical lawsuit, filed in Washington, D.C. by A.G. Racine against Amazon, earlier this year.[14] D.C.’s lawsuit, like California’s, claims Amazon violated D.C.’s antitrust laws for barring third-party sellers from offering their products for lower prices on other online retail channels.[15] The D.C. Complaint claimed Amazon’s anticompetitive practices violated § 28-4502 of the District of Columbia Antitrust Act (the Act).[16] The Act provides “[e]very contract, combination in the form of a trust or otherwise, or conspiracy in restraint of trade or commerce all or any part of which is within the District of Columbia is declared to be illegal.”[17] The Act uses broader language and lacks the explicit limitations on restraints on trade the California’s Cartwright Act places on trusts.
The D.C. Superior Court granted Amazon’s motion to dismiss the claim.[18] Amazon argued using pricing restrictions in contracts is a common and legal practice in the retail industry.[19] The court determined D.C.’s Complaint failed to state an anticompetitive effect under D.C. law.[20] While the D.C. Superior Court found D.C. failed to state a claim, California’s claim provides numerous examples of Amazon engaging in conduct prohibited by California state law and harmful to consumers.[21] A.G. Bonta was able to learn from the D.C. Superior Court ruling to ensure the Complaint included enough evidence to show Amazon’s Pricing Parities have an anticompetitive effect.[22]
The outcome of the D.C. lawsuit against Amazon did not deter A.G. Bonta from filing the lawsuit against Amazon. He believes California’s pro-consumer state law allows for the possibility of a more favorable result in California than in D.C.’s claim against Amazon.[23] The outcome of this case will be influential on future litigation against Big Tech companies.[24] Depending on the outcome, other states looking to curb Big Tech’s anticompetitive tactics will look to legal decisions made from this case and apply them.[25] It will be interesting to see whether California’s pro-consumer state law results in a different outcome and whether California will be able to provide a greater amount of evidence
[1] Complaint at 1, People of California v. Amazon.com, Inc., No. CGC-22-601826 (Cal. Super. Ct. Sept. 15, 2022), 2022 WL 4289172.
[2] David McCabe, D.C. Suit Accusing Amazon of Controlling Prices Is Thrown Out, N.Y. Times (March 18, 2022) https://www.nytimes.com/2022/03/18/technology/amazon-dc-antitrust-suit.html#:~:text=The%20lawsuit%20focused%20on%20how,the%20board%2C%20the%20suit%20argued.
[3] Dan Papscun, Amazon Faces Expansive California Antitrust Law in Pricing Suit, Bloomberg L. (Sept. 21, 2022) https://news.bloomberglaw.com/tech-and-telecom-law/amazon-faces-expansive-california-antitrust-law-in-pricing-suit.
[4] Complaint at 15, People of California v. Amazon.Com, Inc., No. CGC-22-601826 (Cal. Super. Ct. Sept. 15, 2022).
[5] Id. at 42.
[6] Id. at 42, 65.
[7] Id. at 43.
[8] Id. at 77.
[9] Karen Weise & David McCabe, California Files Antitrust Lawsuit Against Amazon, N.Y. Times (Sept. 14, 2022) https://www.nytimes.com/2022/09/14/technology/california-files-antitrust-lawsuit-against-amazon.html.
[10] Complaint at 1, People of California v. Amazon.Com, Inc., No. CGC-22-601826 (Cal. Super. Ct. Sept. 15, 2022).
[11] Bus. & Prof. § 16720.
[12] Bus. & Prof. § 16720(a)-(d).
[13] Weise & McCabe, supra note 9.
[14] Papscun, supra note 3.
[15] Rhea Binoy, U.S. Court Dismisses D.C. Antitrust Lawsuit Against Amazon, Reuters (March 21, 2022) https://www.reuters.com/business/retail-consumer/us-court-dismisses-dc-antitrust-lawsuit-against-amazon-2022-03-19/.
[16] Complaint at 1, District of Columbia v. Amazon.Com, Inc. (May 25, 2021).
[17] D.C. Code Ann. § 28-4502 (West 2022).
[18] John D. McKinnon, Amazon Wins Dismissal of D.C. Antitrust Lawsuit Over Pricing, Wall St. J. (March 18, 2022), https://www.wsj.com/articles/amazon-wins-dismissal-of-d-c-antitrust-lawsuit-over-pricing-11647645389.
[19] Id.
[20] Papscun, supra note 3.
[21] Id.
[22] Id.
[23] Id.
[24] Weise & McCabe, supra note 9.
[25] Id.