Amazon’s Minimum Margin Agreements Restrict Competition Among Online Retailers, Class Action Alleges

A proposed class action lawsuit alleges that Amazon entered into Minimum Margin Agreements (MMA) with vendors to prevent other online retailers from offering the same products that Amazon sells at a lower price.

According to Washington’s 55-page complaint, Amazon’s MMAs violate the federal price-fixing ban in that they essentially set a minimum retail price for products. By restricting competition among its online rivals, the suit claims, Amazon harmed consumers by artificially raising the online prices of thousands of retail brands the company sells.

The filing states that under an Amazon MMA, a vendor guarantees both that Amazon will be able to price the vendor’s product competitively with other online retailers “at least 95% time” and that Amazon will receive a minimum margin on each sale regardless of the actual price at which a particular item is sold by defendant. According to the complaint, Amazon enforces its MMAs by requiring suppliers to compensate it monthly for any lost margin resulting from lowering its retail price to match that of a competitor.

“To illustrate how MMAs work, a supplier might agree, for example, to sell their product at a wholesale price of $5 per unit and that they will compensate Amazon if they receive less than $4 more than their cost. marginal. If Amazon sells at least 95% of the vendor’s product for $9 or more, the vendor owes nothing to Amazon. But if, in this example, Amazon drops its price to $8 to match a competitor’s price that month, then the supplier will owe Amazon $1 for each product sold at $8 over the 5% threshold. .

Instead of risking its own profit margins to compete with retail rivals on price, Amazon ultimately shifts that risk onto its suppliers, according to the lawsuit. As a result, Amazon has ensured that its suppliers adopt a de facto minimum retail price, or floor price, for their items across the marketplace.

“By requiring suppliers to compensate Amazon whenever their products sell below the agreed-upon price floor, MMA agreements fix prices by penalizing suppliers unless they suppress competitive pricing from Amazon’s competitors,” says the case.

Additionally, MMAs increase a vendor’s cost of doing business and exist simply to accommodate Amazon, not as a means to promote the vendor’s products or foster price competition in the marketplace, the lawsuit says. In a competitive market, the costume grows, a supplier would benefit from rotating price promotions with different retailers to ensure a wide range of distribution options. The case, citing former Amazon senior category manager Martin Heubel, says providing margin support to the defendant is “inefficient” for suppliers and drives up consumer prices.

A supplier who denies Amazon’s request for “back margin financing,” according to the lawsuit, will have their product “delisted, no longer in order, or removed from most consumer searches.”

The lawsuit seeks to represent all persons who, on or after July 13, 2018, purchased goods from Amazon subject to its minimum margin agreements.

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