Amazon Anticompetitive Minimum Margin Agreements Class Action

This antitrust class action brings suit against Amazon.com, Inc., alleging that it uses minimum margin agreements (MMAs) to keep other online retailers from providing the same products Amazon sells at lower prices. The complaint alleges that the MMAs are a form of price fixing, because they set minimum retail prices for goods, restrain Amazon’s competitors, and cause consumers to pay higher prices.

The National Class for this action is all persons who, on or after July 13, 2018, bought goods from Amazon subject to its minimum margin agreements. The complaint also proposes a series of individual, similar state classes.

The MMAs ensure that Amazon will receive a certain minimum margin on the sales it makes of certain goods, the complaint says, or it requires its suppliers to make up the difference.

Here’s the complaint’s illustration of how the MMA works: “[A] supplier may agree, for example, to sell its product at a wholesale price of $5 per unit and that it will compensate Amazon if it receives less than $4 over its marginal cost. If Amazon sells at least 95% of the supplier’s product for $9 or more, the supplier owes Amazon no money. But if, in this example, Amazon lowers its price to $8 to match a competitor’s price that month, then the supplier will owe Amazon $1 for every product sold at $8 beyond the 5% threshold.”

The complaint alleges that Amazon isn’t risking its own profit margin when it lowers a price to beat its competition; instead, the complaint says, it requires that its suppliers bear the risk.

The shifting of the risk to the suppliers, the complaint alleges, “ensure that Amazon’s suppliers adopt a de facto minimum retail price (or floor price) for their products market-wide. … By requiring suppliers to compensate Amazon whenever their products sell below the agreed floor price, the MMA agreements fix prices by penalizing suppliers unless they suppress competitive pricing from Amazon’s rivals.”

“In a competitive market,” the complaint claims, “suppliers would benefit by rotating price promotions with different retailers to ensure a broad range of distribution options.” But the complaint claims that the MMAs are put in place to benefit Amazon and result in higher consumer prices.

According to the complaint, “MMAs are anticompetitive because they disrupt suppliers’ relationships with other retailers and force suppliers to incur unnecessary costs that they would otherwise avoid by distributing through more efficient retailers.”

The complaint also alleges that Amazon makes retailers wait to get paid. “So, while big box retailers, like Walmart, Target, and Costco are lucky if they can sell products to their customers within a couple of weeks after paying their suppliers, Amazon pays its suppliers months after it [has] sold their products” which the complaint says is like Amazon borrowing from the suppliers to pay for its operations.

The complaint concludes, “Amazon’s MMAs give an inefficient, dominant retailer higher profits, while preventing other online retailers with lower cost distribution systems to charge lower prices.”

Article Type: Lawsuit
Topic: Antitrust
Tags: Antitrust, Requiring Consumer to Pay Higher Prices, Risk Shifted to Supplier