Amazon must pay $2M and end program after price-fixing investigation by Washington AG

The attorney general of Washington filed a lawsuit against Amazon, accusing it of price fixing.

Basically, it worked like this. A minimum price for an item would be agreed on by Amazon and a third-party seller. Amazon would split the profits if they sold more of the item. It isn't so different from buying a bunch of stuff and selling it. That isn't what happened due to how Amazon presents items in the store.

Amazon ended up increasing the price of the items to match other retailers, and prevented sellers from offering discounts, according to the AG's office. Buyers were often driven to purchase Amazon's own brands, which it could price however it chose.

Prices for the vast majority of the remaining products enrolled in the “Sold by Amazon” program stabilized at artificially high levels.

…When prices increased, some sellers experienced a marked decline in the sales and resulting profits from products enrolled in the program. Faced with price increases, online customers sometimes opted to buy Amazon’s own branded products — particularly its private label products. This resulted in Amazon maximizing 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.

The practice was alleged to be in violation of state antitrust laws by Washington AG Bob Ferguson. Amazon is a competitor with third-party sellers because it sells its own goods. A secret agreement between two competitors controlling the cost of goods is pretty much the definition of price fixing.

Amazon said it was all for the good of the customer and completely on the level. The program was shut down for business reasons unrelated to the AG's investigation.

After antitrust authorities started sniffing around, Amazon suspended the program in June. Maybe it was time.

Rather than fight the lawsuit in court, Amazon agreed to a consent decree requiring a payment of $2.25 million and prohibiting the program from being activated in any way, shape or form.

Consumers lose when corporations fix prices. Today's action promotes product innovation and consumer choice, and makes the market more competitive for sellers in Washington state and across the country.