Newly unsealed emails reveal the sneaky ways that Amazon colludes with rivals to raise prices across the Internet on "everything from diapers to clothing to furniture," California Attorney General Rob Bonta alleged in a press release Monday.
"Amazon and a competitor will knowingly stop price matching each other, so that one retailer can increase its price, and the other retailer can match to the new, higher price," Bonta alleged, pointing to one of three such schemes described in Amazon emails. "Thus, both competitors start selling at a higher price, increase their profits, and consumers pay more."
The emails surfaced in a lawsuit that the state of California filed in 2022, accusing Amazon of wielding its tremendous influence as the world's largest retailer to pressure vendors into increasing prices on rival e-commerce websites or removing products from cheaper platforms entirely. According to The New York Times, these emails offer "a rare behind-the-scenes look at how Amazon operates its $2.66 trillion empire."
Three ways Amazon allegedly rigs prices
Amazon works in three ways to pressure vendors into manipulating competitor prices, Bonta alleged.
In one supposed scheme, Amazon proposes price matching by agreeing to increase the price of a product or temporarily pause its sales, which then allows the other retailer to raise its price.
Another route Amazon frequently takes flips that scheme. When Amazon sees a rival offering a product at a price it considers unprofitable, it pressures vendors to get the rival to raise their price to a level Amazon likes. Once the rival raises its price, Amazon then matches it.
Finally, Amazon allegedly follows a third, arguably more aggressive, path to get vendors to remove products entirely from platforms offering lower prices. That way, Amazon won't be forced to lower its price to compete.
All three scenarios raise prices for consumers, Bonta alleged.
In most examples, Amazon's requests for price increases were met with urgency. Some prices spiked within a day, as vendors allegedly feared that Amazon might drop them from the platform or otherwise punish them for allowing cheaper sales elsewhere.
Some of the price increases Amazon requested were higher than others. Whereas emails showed Amazon pushed Walmart and Levi's to raise the price of khaki pants by about a $1.50, another vendor, All the Rages, got Walmart to increase prices of two different lamps by about $15 each.
Even man's best friend has been targeted by the alleged price-fixing. Emails showed one vendor, GlobalOne, used a "happy face emoji" after Chewy agreed to increase prices on 13 kinds of Canine Naturals pet treats. In that example, Amazon immediately took steps to increase prices even more after Chewy agreed to the initial request to price match, Bonta alleged.
"Overall this looks like it’s working!" GlobalOne's spokesperson reported to Amazon when the higher prices popped up on both platforms.
Some price hikes linked to Prime Day
Some requests for price increases were permanent, Bonta alleged. Other times, Amazon sought temporary price increases ahead of some of the biggest sales days on its platform in a seeming bid to coerce vendors at key moments when they couldn't afford to push back. As a result, Amazon seemingly set a higher base price before enacting significant price drops that were intended to surge sales.
For example, the e-commerce giant threatened to remove four products sold by a furniture company called Armen Living "immediately" before the "critical sales days of Black Friday and Cyber Monday," if "drastically" lower prices weren't increased on rival sites, including Home Depot's website. That pressure campaign sought to mark up a barstool from $156.58 to $172.97 and a dining chair from $103.56 to $119.99, emails showed.
Similarly, Amazon pushed a lawn/garden vendor, Scotts, to request a price increase "even if it is just for the three days leading up to" Prime Day, an email showed.
Amazon downplays emails
Amazon's spokesperson, Mark Blafkin, told The New York Times that the company looked forward to responding to California's latest filing in court. Downplaying the filing as a "transparent attempt to distract from the weakness of its case," Blafkin claimed that the evidence isn't "new" and that Bonta has had the emails for years and is now exaggerating their significance ahead of the trial.
“Amazon is consistently identified as America’s lowest-priced online retailer, and we’re proud of the low prices customers find when shopping in our store," Blafkin said.
However, Bonta argued that the examples surfaced in the lawsuit are substantial evidence of explicit price-fixing. They "are not outliers" but "illustrative of countless interactions—spanning years and many different employees and product lines—in which Amazon, vendors, and Amazon’s competitors agree to increase and 'fix' the prices of products on other retail websites," he alleged.
"Amazon’s goal is to insulate itself from price competition by preventing lower retail prices in the market," Bonta alleged. To achieve this, he noted that "coercive exchanges with vendors abound in Amazon documents."
He alleged that additional discovery has shown that Amazon trains its employees to use vague language in emails or, better yet, to avoid having such discussions by email. As best practice, Amazon workers are told to request that vendors schedule calls to negotiate what Amazon deems "problematic" pricing on rival sites due to the "delicate" nature of the requests.
AG: Amazon stole millions from consumers
Bonta is hoping this evidence will help California secure a preliminary injunction blocking Amazon from any price-fixing while the trial proceeds. A hearing on the request for the preliminary injunction is scheduled for July 23, while the case is scheduled to go to trial in January 2027, the press release said.
"Amazon’s price fixing is taking money out of the pockets of millions of California consumers every day and reducing available product selection/choice," Bonta alleged, arguing that California had shown that it was likely to prevail in proving Amazon fixed prices.
To fight the request, Amazon will need to demonstrate that it "would suffer grave or irreparable harm from the issuance of the preliminary injunction," Bonta said. And he expects that "Amazon cannot meet this burden," since the price-fixing is allegedly "explicit."
"The price-fixing is not driven by the vendors," Bonta told the court. "Rather, Amazon tells vendors what prices it wants to see to maintain its own profitability."
"Amazon cannot show that any harm arises from a prohibition against illegal acts," and financial loss does not "suffice to show grave or irreparable harm," Bonta argued.
"You don’t see price-fixing so explicitly and egregiously in writing like this," Bonta told the NYT.
Read full article
Comments