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California’s Antitrust Lawsuit against Amazon and the Consumer Welfare Standard

Rob Bonta, California’s attorney general, says Amazon’s business practices decrease competition and increase prices for consumers no matter where they shop on the internet. That’s why Bonta claimed he was compelled to file an antitrust lawsuit against Amazon last September. Currently, the suit is limited in impact to just California, where Amazon has nearly 25 million customers. However, if successful, the impact could be felt around the rest of the nation.

Bonta’s lawsuit focuses on Amazon’s penalties for sellers if they are found to list products at lower prices on other websites. Currently, if Amazon spots the same product from a seller on one of their competitor’s websites at a lower price, it removes buttons like “Buy Now” and “Add to Cart” from the seller’s product listing page on Amazon. According to the complaint, some sellers cite this as a major issue. They say they could offer products for lower prices on non-Amazon websites because of the higher costs Amazon charges. However, because Amazon is the largest online retailer, many sellers would rather raise prices on other sites and avoid the potential risk of losing potential sales on Amazon.

Former ISEG Executive Director weighs in California’s lawsuit against Amazon

On January 23, 2023, Dr. Ted Bolema, former Executive Director of the Institute for the Study of Economic Growth (ISEG) who retired in December, 2022, and the Mercatus Center, published a policy paper on the impact of the lawsuit on consumers and antitrust legal precedents like the Consumer Welfare Standard, which provides a consistent basis on which antitrust law is implemented.

Here’s an excerpt from the article:

If California ultimately succeeds, one can expect more weaponizing of antitrust enforcement to target companies for their size rather than for any harm to consumers. Those who are alarmed with Amazon’s size and success may cheer this outcome, but such a win by the California attorney general would not be an outcome worth celebrating for those who care about the benefits to everyday consumers.

Dr. Theodore Bolema
Former Executive Director – Retired

Read the whole policy paper at the Mercatus Center or in our publications.