A new antitrust lawsuit accuses Apple, Inc. and Amazon of conspiring to drive up prices on iPhones by limiting the number of resellers on the Amazon Marketplace.
The lawsuit filed in the U.S. District Court for the Western District of Washington on Nov. 9 alleges “an unlawful horizontal agreement between Apple and Amazon to eliminate or at least severely reduce the competitive threat posed by third-party merchants.”
Attorneys for the named plaintiff, Steven Floyd of Williamsport, say historically there have never been limits on the number of Apple resellers on Amazon’s site. In early 2018, there were at least 600 third-party Apple resellers active on Amazon, which resulted in reduced prices. Some third-party merchants sold Apple products at prices 20 percent less than buying from Apple directly.
“This posed a problem for both Apple and Amazon,” the legal filing states. Part of how Apple has maintained high prices over the years is by limiting supply available to resellers who could undercut the company’s profits. Price competition on Amazon “threatened to destabilize the high prices Apple seeks to sustain in its own stores.”
Attorneys write that this was also a problem for Amazon, as Apple — displeased with the price competition on Amazon — “refused to authorize Amazon to sell Apple’s most popular products.” This caused Amazon to source Apple products elsewhere, raising its own costs.
As a result, the two companies “decided in 2018 to address them collectively” and moved forward with a horizontal agreement to eliminate nearly all Apple resellers on the Amazon Marketplace.
According to the plaintiff’s attorneys, “the parties’ illegal agreement brought the number of third-party sellers of Apple products on Amazon Marketplace from roughly 600 to just seven sellers – a loss of 98%, and by doing so, Amazon, which was formerly a marginal seller of Apple products, became the dominant seller of Apple products on Amazon Marketplace.”
The lawsuit was filed by Hagens Berman, a law firm nicknamed “Most Feared Plaintiff’s Firm,” which has previously sued Apple and won a $400 million settlement with e-book purchasers.
“When our antitrust trial team reviewed the numbers behind this lawsuit, we very quickly noticed several red flags. Suddenly losing 98% of sellers of a particular product is genuinely unheard of, especially when the product at hand is made by the world’s largest tech company and sold by the world’s largest retailer,” said Steve Berman, managing partner at Hagens Berman representing the proposed class of consumers. “Apple and Amazon both stood to benefit from this anticompetitive agreement and they entered it knowing it would harm the public.”