Amazon will shut down its 'Sold by Amazon' 3rd-party-seller program and pay $2.25 million to settle price-fixing allegations

·3 min read
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An Amazon package.Beata Zawrzel/NurPhoto via Getty Images
  • Amazon will shutter the third-party-seller program Sold by Amazon over allegations of price fixing.

  • Washington's AG said it "unreasonably restrained competition in order to maximize its own profits."

  • The company will also pay $2.25 million to settle the allegations.

Amazon is shutting down its third-party-seller program "Sold by Amazon" after the company was accused of price-fixing.

Washington Attorney General Bob Ferguson announced Wednesday that Amazon would end the program nationwide and pay $2.25 million to settle the allegations under a legally binding resolution.

Ferguson's lawsuit alleged that Amazon violated antitrust laws and "unreasonably restrained competition in order to maximize its own profits off third-party sales" by agreeing on prices with these sellers instead of competing with them.

"Consumers lose when corporate giants like Amazon fix prices to increase their profits," Ferguson said 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."

The program ran from 2018 to 2020 and guaranteed third-party sellers a minimum payment for product sales "in exchange for their agreement to stop competing with Amazon for the pricing of their products," the release said. Whenever sales exceeded the minimum, Amazon split the extra proceeds with the sellers.

Amazon had its pricing algorithm match prices offered by some external retailers, the lawsuit said. This meant higher prices and lower sales for the sellers, as customers sometimes turned to Amazon's branded products instead.

"This resulted in Amazon maximizing its own profits regardless of whether consumers paid a higher price for sales of products enrolled in the 'Sold by Amazon' program or settled for buying the same or similar product offered through Amazon," the release said.

The release alleged Amazon's pricing algorithm set artificially high prices for many of the sellers' products because it was programmed "to maintain the seller's pre-enrollment price as the price floor." Sellers had few options to offer discounts without dropping out of the program, which hurt their sales and customers' wallets, Ferguson alleged.

Amazon told Insider the program was started to give small businesses another channel to get their products to market and to lower prices for consumers. The company said Sold by Amazon was shut down for business reasons unrelated to the investigation.

"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," a company spokesperson said in a statement. "While we strongly believe the program was legal, we're glad to have this matter resolved."

Amazon faced a similar lawsuit in May, when Washington, DC, Attorney General Karl Racine accused the company of creating "an artificially high price floor across the online retail marketplace" by demanding third-party sellers not sell their products at lower prices on other websites.

Besides Sold by Amazon, the company has recently ended or suspended a handful of other programs, according to reports.

The Financial Times reported earlier this week that the company ended its ambassador program at the end of last year. The news outlet cited sources with knowledge of the matter. The program had paid warehouse workers to tweet positively about Amazon. Also this week, The Information reported that Amazon suspended its pay-to-quit program, which offered workers up to $5,000 to quit after busy seasons and agree never to return.

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