Amazon has been forced to shut down its ‘Sold by Amazon’ program in the US that allowed the e-commerce giant to agree on a price with third-party sellers, rather than compete with them.
According to the Washington Attorney General’s Office, Amazon unreasonably restrained competition in order to maximize its own profits off third-party sales, constituting unlawful price-fixing and breaking anti-trust laws.
Attorney General Bob Ferguson announced late on Wednesday that as a result of his office’s price-fixing investigation, Amazon will shut down the “Sold by Amazon” program nationwide.
“Consumers lose when corporate giants like Amazon fix prices to increase their profits,” Ferguson said in a statement.
“Today’s action promotes product innovation and consumer choice, and makes the market more competitive for sellers in Washington state and across the country.”
In addition, Amazon will pay $2.25 million to the Attorney General’s Office, which will be used to support the antitrust enforcement, which does not receive general fund support.
The e-commerce giant offered the “Sold by Amazon” program from 2018 through 2020 on an invitation-only basis.
It invited several hundred third-party sellers with whom it had previously competed for online consumer sales on its online marketplace and other e-commerce platforms.
There are more than 2.3 million third-party sellers on Amazon worldwide.
Over the last two decades, Amazon’s sales of its own branded products grew from $1.6 billion in 1999 to $117 billion in 2018.
Over that same period, third-party sales grew exponentially from $100 million in 1999 to $160 billion in 2018.
Third-party sales account for over half the sales on Amazon.
According to Ferguson, Amazon targeted a small fraction of the millions of third-party sellers on its platform to join the “Sold by Amazon” program.
Amazon kept the program small as an experiment, then slowly began to request more sellers join as it evolved.
Ferguson asserted that Amazon enticed sellers into the “Sold by Amazon” program by “guaranteeing that they would receive at least an agreed-upon minimum payment for sales of their consumer goods in exchange for their agreement to stop competing with Amazon for the pricing of their products”.
For example, if a seller and Amazon agreed to a $20 minimum payment and the item sold for $25, the seller would receive the $20 minimum price and share the $5 additional profit with Amazon, in addition to any fees.
The “Sold by Amazon” program resulted in prices for some products increasing when Amazon programmed its pricing algorithm to match the prices that certain external retailers offer to online consumers.
Amazon has faced several allegations of anticompetitive conduct globally in the past too.