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Pricing problems

California sues Amazon for anticompetitive practices

California on Wednesday filed a lawsuit against retail giant Amazon, claiming it is harming competition by forcing third-party sellers to sell only at their lowest prices in listings on the platform, CNN reports.

Specifically, California Attorney General Rob Bonta has alleged that the company is in violation of California's Unfair Competition Law and the Cartwright Act due to anticompetitive contracting practices. 

Third-party merchants make up the majority of the sales on Amazon's platform. California is claiming that Amazon penalizes sellers and suppliers who offer cheaper prices elsewhere by highlighting their products less obviously or altogether blocking their postings on the Amazon website, NPR reports.

The practice has allowed Amazon to essentially implement a price floor, or a limit on how low a product can be priced. Many merchants are likely able to offer cheaper prices on other sites, due to Amazon's higher usage fees; but, since it's the most popular online retailer, sellers would rather just increase their prices elsewhere so they can still be seen on Amazon, The New York Times reports.

The current lawsuit seeks to block Amazon from anticompetitive contracts and issue fines for its allegedly unfair gains. For now, the ruling would only apply to the state of California, but the result could lead to changes across the country.

"We won't allow Amazon to bend the market to its will at the expense of California consumers, small business owners, and a fair and competitive economy," Bonta remarked in a statement.