WHAT’S THE ISSUE?
Hagens Berman has been retained by Arizona Attorney General Kris Mayes and has filed a consumer-protection and antitrust lawsuit on behalf of the state of Arizona. The lawsuit accuses the world’s largest online retailer of violating Arizona’s consumer-protection and antitrust laws by allegedly enforcing anticompetitive price parity policies and “using a biased algorithm to determine which offers shoppers will see, and therefore which sellers they will buy from, when they search for items on Amazon.”
HOW HAVE ARIZONA CONSUMERS BEEN AFFECTED?
Amazon has operated in Arizona since at least 2010, according to the lawsuit. From its 17 fulfillment and sortation centers and 13 delivery stations in Arizona, Amazon dispatches Amazon orders to millions of Arizona customers who spend on average $91.55 per month on Amazon.com ($1,098 per year).
The lawsuit alleges that Arizona consumers have been harmed by Amazon’s Buy Box algorithm, which routinely induces consumers to buy products listed for sale at higher prices. Amazon’s price parity restrictions have also allegedly harmed Arizona consumers by artificially raising the cost of goods sold on Amazon. The lawsuit states, “if an Arizona business owner sells a sweater on Amazon for $50, Amazon deems it a ‘violation’ of the BSA for the business owner to sell the same sweater on her own website for $45—even though she is not paying fees to sell via her own site.”
WHAT IS AT STAKE?
The lawsuit brought by the Arizona Attorney General and Hagens Berman brings claims under the Arizona Consumer Fraud Act. This law prohibits the “act, use or employment by any person of any deception, deceptive or unfair act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact with intent that others rely on such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise whether or not any person has in fact been misled, deceived or damaged thereby” as “unlawful practices.” The lawsuit also brings a claim under the Arizona Uniform State Antitrust Act to protect Arizona residents from what the lawsuit deems Amazon’s “anticompetitive price parity policies.”
The lawsuit seeks relief through disgorgement, civil penalties, fees and injunctive relief to prevent Amazon from continuing its allegedly deceptive and anticompetitive behavior.
AMAZON’S BUY BOX ALGORITHM EXPLAINED
When more than one seller offers an item for sale on Amazon’s marketplace, an Amazon algorithm selects one seller’s offer to appear in the “Buy Box,” where nearly all purchases are made. The lawsuit alleges that consumers reasonably believe the Buy Box offers the best price available for a given item, but in fact the algorithm is biased in favor of offers that are sold by Amazon or fulfilled by Amazon, because those offers are most lucrative for Amazon. The result is that the algorithm often steers consumers toward products that are more profitable for Amazon while obscuring other, more affordable options, thus causing consumers to pay more for products than they would pay if Buy Box algorithm weren’t biased in Amazon’s favor.
ABOUT AMAZON’S ALLEGED PRICE PARITY
According to the lawsuit, Amazon has allegedly violated Arizona’s antitrust law by “exploiting its monopoly power to impose price parity provisions that force third-party sellers to keep prices at supra-competitive levels even at non-Amazon retail sites, ensuring that prices on Amazon stay high.” In 2019, Amazon quietly eliminated a “Price Parity” clause in its seller agreement which had expressly prohibited sellers from offering their goods on other sites for lower prices than listed on Amazon. To continue its grip on pricing, Amazon began interpreting its “Brand Standards,” a so-called “Fair Pricing” Policy, and a “Seller Code of Conduct” to make it a “violation” for a third-party seller to sell an item off Amazon for less than it sells the same item on Amazon, according to the lawsuit.
Attorneys say Amazon uses automated computer software to scan the Internet for goods offered via other websites for lower prices than they are listed on Amazon. “Sellers are alerted of pricing ‘violations’ within minutes,” the lawsuit states. “And Amazon imposes penalties on offending sellers, including stripping offers of their Amazon Prime shipping eligibility.” The result is that Amazon allegedly faces less price competition from third-party retailers and can keep its own prices high, forcing Arizona consumers to pay more for goods on Amazon than they would pay in a truly competitive marketplace.
TOP ARIZONA LAW FIRM
Hagens Berman is home to some of the most well-respected and successful lawyers representing plaintiffs, and the firm has achieved total settlements valued at more than $320 billion since its founding in 1993. The firm has taken on major institutions for fraudulent billing and predatory behavior, including other Big Tech companies, the mortgage market, utility companies, product manufacturers and other negligent parties. The firm has also filed active lawsuits against Amazon regarding its Buy Box algorithm in the U.S. and U.K.
