CASE STUDIES & MAJOR DEVELOPMENTS
District of Colombia v. Amazon
Playing Hardball
Technology firms have done a lot to consolidate power and leverage their positions. Sometimes, this yields powerfully negative consequences. The D.C. Attorney General believes that “that Amazon acted unlawfully to maintain … a monopoly among online marketplaces,” which trapped their constituents in a no-win financial cycle.
See the D.C. complaint here.
“If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.”
- Warren Buffet
Summary of the D.C. Complaint
Count 1: Most Favored Nation
Amazon’s ‘Most Favored Nation’ clause requires that sellers offer product at the lowest price offered anywhere. This is despite the fact that Amazon adds a substantial fee to each transaction. D.C. claims that the clause damages its citizens ability to compete, but is required to access the world’s largest market.
Axios 3/11/2019
Long before this case, the world was concerned about Most Favored Nation Clauses. In 2019, Amazon claimed it would stop using them, though obviously, it didn't.
Count 2: Guaranteed Profits
Amazon is heavily promoting “Margin Guarantee” agreements among vendors. This is a type of system where Amazon will proffer your products in a market, typically wholesale, where they control costs, and engage in more fluid competition. Here, Amazon will always make a predetermined profit, even if it sells at a loss.
ideoclick 9-17-2019
Here, Andrea Leigh explains the difficulties of using Margin Guarantee vendor agreements, particularly with the incredibly high risk profile. It is quite clear that this is beneficial only to one party.
Counts 3-4 Attempted Development & Maintenance of Monopoly
With between 50% and 70% of all online retail sales, and the unequaled access to information, Amazon dominates the space with great effectiveness. When combined with uncompetitive practices, D.C. claims Amazon attempted to create a monopoly that damages their constituents.
Wall Street Journal 04-23-2020
Amazon has a long history of harsh, and seemingly unfair competition with its own customers. In this article, Amazon used undisclosed market data to isolate high-profit goods in order to compete directly.
