Law Street Media

Antitrust Suit Takes on Amazon’s ‘Minimum Margin Agreements’

Amazon's logo on a glass building.

Palo Alto, CA, USA - Feb 18, 2020: The Amazon logo seen at Amazon campus in Palo Alto, California. The Palo Alto location hosts A9 Search, Amazon Web Services, and Amazon Game Studios teams.

A class action filed against Inc. claims that its contractual agreements with suppliers are anticompetitive because they raise consumer prices by immunizing Amazon from competition from other retailers. In addition to state law antitrust violations, the complaint says that the minimum margin agreements (MMAs) violate Section 1 of the Sherman Act’s prohibition against price-fixing by setting a de facto minimum retail price for the products under agreement.

The lawsuit explains how the agreements serve Amazon while disserving its rivals and customers. “Under the MMAs, Amazon suppliers guarantee both that Amazon will be able to price the supplier’s product competitively against other online competition at least 95% of the time and that Amazon will receive a minimum margin on each sale regardless of the actual price that Amazon sells the product at retail,” the filing says.

The upshot is that Amazon shifts the risk of profit margin losses to its suppliers, thereby ensuring that suppliers adopt a floor price for their products market-wide, the complaint says. The lawsuit says that the e-commerce company polices the agreements by requiring its suppliers to compensate it monthly “for any lost margins necessitated by lowering its retail price to match a competitor.”

The lawsuit calls the MMAs a “naked restraint” under the Sherman Act and a “per se” violation of California’s Cartwright Act and the Maryland Antitrust Act. The plaintiffs, four Californian consumers and a Marylander, all Amazon Prime members who have claimed to have spent between $2,000 and $26,000 on Amazon shopping annually, seek to represent a nationwide class and unspecified state subclasses.

The nationwide class definition covers “All persons who, on or after July 13, 2018, purchased goods from Amazon subject to its minimum margin agreements.” The plaintiffs and putative classes are represented by Hagens Berman Sobol Shapiro LLP.

Notably, other lawsuits have taken on Amazon over its pricing practices. One, filed by a consumer in June, alleges that Amazon shoppers absorb Amazon’s “referral fees,” or commissions charged to third-party sellers by the platform. Another suit, in which briefing is underway in Amazon’s second dismissal bid, echoes allegations in this week’s suit. It contends that the e-commerce titan enforces a price floor for third-party sellers across online platforms, preventing parties from undercutting a good’s Amazon price elsewhere.

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