As a result of a two-year investigation into antitrust practices, Amazon has indefinitely suspended their “Sold by Amazon” (SBA) program, the office of WA. state Attorney General Bob Ferguson announced earlier this week.
The invitation-only program was launched in 2018 by Amazon to allow select third-party sellers with an active or pending trademark to partner with Amazon by establishing a minimum payment rate provided they agreed not to compete with the retailer. If sales exceeded the minimum gross proceeds, a portion of any additional revenue from an SBA product would be subsequently allocated to Amazon.
Yet according to a lawsuit filed by the attorney general’s office in King County Superior Court, the program actually decreased competitive offers by raising prices at artificially high levels through increases and discount prevention, requiring consumers to pay more for SBA products.
As a result of the probe, Amazon has agreed to pay $2.25 Million to the state of Washington as well as provide annual updates to the attorney general’s office regarding their compliance with state and federal antitrust law.
A chief point of the investigation centered around whether or not Amazon fixed minimum prices to their own advantage, alleging that Amazon used its A9 algorithm to match and lower their own prices to those of top selling enrollees in the program. Once the price of SBA products increased, the suit alleges, sellers saw a decrease in sales as a result of shoppers opting to purchase similar yet more affordable products from Amazon through its private label brands.
The suit also claimed that Amazon prevented many sellers from offering discounts, risking a lack of sales while still paying Amazon for fulfillment and storage fees, allowing Amazon to maximize its own profits.
“Consumers lose when corporate giants like Amazon fix prices to increase their profits,” stated the attorney general’s office in a press release. “Today’s action promotes product innovation and consumer choice, and makes the market more competitive for sellers in Washington state and across the country.”
As early as June 2020, Amazon announced it would be winding down the SBA program altogether for reasons unrelated to the investigation, which began three months prior.
“This was a small program to provide another tool to help sellers offer lower prices, much like similar programs common among other retailers, that has since been discontinued,” said Amazon spokesperson Glenn Kuper. “While we strongly believe the program was legal, we’re glad to have this matter resolved.”
The settlement occurred directly after a similar antitrust suit was filed by Washington, DC Attorney General Karl Racine in May 2021 alleging Amazon has illegally maintained a monopoly by raising third-party prices and imposing restricting contract provisions on sellers. Both suits follow on the heels of recent Congress and Senate bills, including the Ending Platform Monopolies Act and the American Innovation and Choice Online Act—the latter of which has resulted in Amazon issuing a recent statement citing the potential for ‘collateral damage’ to third-party sellers as a result.
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