The Seattle law firm that in 2011 was first to file suit against Apple and five major publishers for fixing e-book prices has a new target: Amazon.

On March 19, lawyers from Hagens Berman Sobol Shapiro filed a massive class action lawsuit in the U.S. District Court in Seattle, accusing Amazon of using a form of most favored nation clause (which Amazon calls its “fair pricing” provision) to effect a horizontal price fixing scheme involving the platform's two million third-party sellers.

“Amazon has obtained monopoly power in the U.S. retail e-commerce market, as demonstrated by its power to set the prevailing prices of the vast majority of consumer goods offered for sale on the internet and that it exercises extraordinary control over millions of its online retail competitors,” reads the complaint, which alleges that the company “willfully acquired" its monopoly power in the U.S. retail e-commerce market through “anticompetitive conduct.”

Specifically, the suit alleges that Amazon’s “fair pricing” provision, which requires that products sold on Amazon be priced “equal to or lower than the price of the same item being sold by the seller on other sites,” fulfills essentially the same function as a most favored nation pricing policy the company reportedly told federal regulators in 2019 it would abandon, under threat of investigation. According to the suit, Amazon’s “fair pricing” policy states that if Amazon finds a seller offering lower prices on competing platforms the company can take a range of actions, from removing the buy box to terminating selling privileges altogether.

In announcing the suit, attorneys for Hagens Berman detailed how Amazon operates as a “two-sided platform,” providing services to both third-party sellers and their customers. “For a fee, Amazon permits third parties to register with Amazon Marketplace,” giving “sellers access to millions of buyers and buyers access to millions of sellers.” But through its “fair pricing” provisions, lawyers claim, Amazon essentially creates “a price floor” which, given Amazon’s dominance and size, leads to “supracompetitive prices” for consumers.

"For example, a customer, who purchased a $150 toy on Viahart (the same price concurrently offered at Amazon) paid $37 more for the toy than if the seller was able to sell the product for $37 less on its own website, while making the same profit," the complaint states.

The suit also cites the “collective control” Amazon enjoys with Google over online product searches.

Amazon has obtained monopoly power in the U.S. retail e-commerce market, as demonstrated by its power to set the prevailing prices of the vast majority of consumer goods offered for sale on the internet...

“Amazon controls not only the prices that its two million third-party sellers set for their products on websites, apps, or platforms that compete with the platform, it also exercises a significant level of control over the flow of available information to consumers on the internet, including consumers’ ‘access to price’ information,” the complaint states, noting that competing online retailers, including Walmart and Target, recently expressed concerns to the FTC “that they struggle to break through the ‘information bottleneck’ caused in large part because Amazon and Google collectively control the majority of internet searches for products.”

Lawyers for Hagens Berman claim that roughly 80% of Amazon’s third-party sellers also sell their products on other online retail websites, including their own sites. But, almost half of Amazon’s third-party sellers, lawyers add, generate 81% to 100% of their revenues from their Amazon sales.

The class action suit, initially filed on behalf of two named consumer plaintiffs, alleges three violations of the Sherman Act—price-fixing, monopolization, and attempted monopolization as well violations of various consumer protection statutes, and unjust enrichment. It asks for injunctive relief, as well as damages, fines, and other monetary restitution which, if the charges are proven, could be huge. "Plaintiffs estimate that Amazon caused $55-172 billion in actual damages before trebling as required by federal antitrust laws," the complaint states.

In August of 2011, Hagens Berman was the first law firm to file a price-fixing suit against five of the then Big Six publishers for conspiring with Apple to raise raise e-book prices. The case was eventually joined by the DoJ and 33 states, with Hagens Berman as lead plaintiff for a consumer class. Defendants Hachette, HarperCollins, and Simon & Schuster settled the charges immediately, while Macmillan and Penguin settled later.

After a three-week trial, Judge Denise Cote found Apple liable in July of 2013, eventually triggering some $400 million in consumer refunds and another $50 million in fees. In all, some $566 million was ordered to be repaid to e-book purchasers.

Cleveland-Marshall College of Law Professor Chris Sagers, whose recent book United States v. Apple: Competition in America (Harvard University Press) explores antitrust law through the lens of the Apple e-books case, told PW the case against Amazon is compelling, but significantly more complex than the 2011 case against Apple.

"The plaintiffs probably don't have a slam dunk, but they do have a pretty big retailer imposing pretty anticompetitive terms on a lot of commerce. The outcome will depend a lot on what evidence the plaintiffs can come up with, and also, alas, on what judge they draw at the trial level," Sagers explains. "In principle, the allegation of conspiracy is straightforward, because there is explicit agreement about prices between Amazon and other sellers with which it competes head to head, vying with them to sell substitute products to the same consumers. If anything, that's a sign of how weakened antitrust law has become, that firms believe they can do things like this out in the open. Not that long ago, this kind of agreement would have been hammered out in secret, because it would be illegal."