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The Technology 202

A newsletter briefing on the intersection of technology and politics.

D.C. attorney general targets Amazon’s wholesale biz in expanded antitrust suit

The Technology 202

A newsletter briefing on the intersection of technology and politics.

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Our other 202 newsletters got a new look as well. Check out The Early 202 from Jacqueline Alemany and Theodoric Meyer for a roundup of the best political reporting from Capitol Hill to K Street, all before breakfast.

D.C. attorney general targets Amazon’s wholesale biz in expanded antitrust suit

D.C. Attorney General Karl A. Racine sued Amazon in May over allegations it fixes prices online by preventing the third-party sellers that use its marketplace from offering their products at lower prices elsewhere.

Now the Democratic attorney general is widening the scope of the suit, accusing the tech giant of maintaining its monopoly by locking the wholesalers that provide the company with goods into anti-competitive agreements. (Amazon founder Jeff Bezos owns The Washington Post.)

In a newly filed amended complaint shared with The Technology 202, Racine alleges that Amazon has illegally stifled competition by requiring that first-party sellers, or wholesalers, guarantee the tech giant will make a minimum profit when it buys and resells their goods as its own. 

Racine said his office uncovered through an investigation that the arrangements “insulate Amazon’s online marketplace from competition, further entrench its monopoly, and result in higher prices and less choice for consumers.”

“We knew Amazon’s anti-competitive behavior was far-reaching — and through our investigation, we’re realizing just how far it goes,” he told The Technology 202.

According to the updated suit, the deals allow Amazon to lower its prices to beat out competitors and make the wholesalers who provided it with goods compensate it for any lost profit. This in turn leads wholesalers to increase their prices elsewhere, including when selling to Amazon’s rivals, thus making it harder to compete with the e-commerce giant, Racine alleged. 

The change adds a new dimension to Amazon’s antitrust battles, where it will now need to beat back a fresh set of arguments for why it is a monopoly. 

It’s the first major lawsuit in the United States to target the practice by Amazon, which has faced regulatory scrutiny over its dealings with third-party vendors. Critics have long said the company has strong-armed the latter into unfair deals that make it difficult for rival marketplaces to offer competitive prices. The updated suit adds a new layer to that argument.

Amazon spokesman Jack Evans pointed to a past statement the company issued about the lawsuit, which said, “The DC Attorney General has it exactly backwards – sellers set their own prices for the products they offer in our store.” The statement added, "The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law.”

The action also amplifies Amazon’s legal threats in the United States, where it has been under investigation by the Federal Trade Commission and targeted by new legislation on Capitol Hill. 

State attorneys general in Massachusetts, Pennsylvania, New York and California are also examining whether Amazon has violated antitrust laws, according to news reports.

The European Commission, meanwhile, launched a second antitrust probe in November into whether Amazon has violated its competition policies by allegedly using data from third-party vendors who operate on its marketplace to give its own products an edge.

It’s unclear to what extent, if any, those investigations have targeted Amazon’s grip over its wholesale business, now under fire from Racine. But it hasn’t gone unnoticed. 

During the House Judiciary Committee’s sweeping antitrust investigation into the tech sector, PopSockets chief executive David Barnett testified that his company struck a deal with Amazon for the company to sell its products, only to have the tech giant lower the selling price on them and demand that PopSockets pay for the lost profit margin.

Barnett highlighted the incident to show “the asymmetry in power between Amazon and its partners.” The Judiciary Committee’s antitrust panel listed the arrangement as one of the “abusive tactics” Amazon deploys to exert control over the market in its blockbuster final report

The panel also concluded that Amazon “leverages its market power” by forcing “manufacturers that would prefer to be third-party sellers into being wholesalers” for the site.

Stacy Mitchell, co-director of the anti-monopoly group Institute for Local Self-Reliance and a prominent Amazon critic, said Racine's new complaints “strengthen the case for a structural remedy” against Amazon because it shows the reach of its power.

"So often Amazon's market power is sort of seen in this one dimensional way, and in fact Amazon plays these multiple role roles in the market," she said.

Our top tabs

Lawmakers to debate whether to include funding for new FTC privacy division in massive spending package

The proposal to fund a new technology division at the Federal Trade Commission to the tune of $1 billion will be considered along with more than a dozen other provisions when the House Energy and Commerce Committee meets today. It comes as Democrats race to finalize a spending and tax bill that could be as large as $3.5 trillion. 

Democrats’ lofty goals to advance the plan quickly are in doubt, however. Sen. Joe Manchin III (D-W.Va.), a crucial vote in the Senate, called on Democrats to cut down the bill by as much as half. On the House side, Speaker Nancy Pelosi (D-Calif.) wants to have the package fully written by Wednesday, Tony Romm reports.

A judge’s decision in Apple’s antitrust case could foreshadow major changes for the tech industry

District Judge Yvonne Gonzalez Rogers’s decision could open the door to future legislation, lawsuits and regulatory action by Apple critics. Epic Games filed a notice that it is appealing the decision, which directs Apple to allow app developers to “steer” customers toward payment processors outside Apple but stops short of calling the tech giant a monopolist.

“You see time and time again, our laws are not as sophisticated as the companies violating their spirit,” Sen. Amy Klobuchar (D-Minn.), chair of the Senate Judiciary Committee’s antitrust panel, told my colleague Cat Zakrzewski. “These circumstances cry out for change.”

Questions about Apple’s market dominance remain unsettled, experts told Reuters’ Jan Wolfe and Mike Scarcella. Gonzalez Rogers’s decision will give future plaintiffs a road map for how to sue Apple, legal experts said.

Tech workers are reconsidering moving to Texas after the state banned most abortions

Workers and companies are worried about their futures in the state, Danielle Abril and Gerrit De Vynck report. For years, Texas has promoted itself as a tech haven that has attracted major companies like Oracle and Hewlett-Packard Enterprises.

“We already find it extremely challenging to attract tech workers,” said Vivek Bhaskaran, chief executive of the Austin-based online survey software company QuestionPro. “This seems like an extremely unnecessary conversation we’re going to have to have” with the company’s potential recruits, he said.

Rant and rave

Facebooks admission that a data set it provided to social scientists had serious errors has prompted outrage from some academics and observers. Joe Bak-Coleman, a postdoctoral fellow at the University of Washington’s Center for an Informed Public:

Rebekah Tromble, the director of George Washington University’s Institute for Data, Democracy & Politics:

Errors are expected in data sets like these, said Sol Messing:

Inside the industry

DoorDash and Grubhub’s tussles With regulators heat up following pandemic sales boost (Wall Street Journal)

Privacy monitor

Google reportedly gave some users’ data to Hong Kong authorities in 2020 (The Verge)

Workforce report

Tech companies breathe a sigh of relief at Biden’s vax mandate (Protocol)

Trending

Yoga, organic food and misinformation: Wellness influencers are taking the anti-vaccine movement mainstream (Ashley Fetters and Gerrit De Vynck)

Elon Musk is dominating the space race. Jeff Bezos is trying to fight back. (Christian Davenport)

Daybook

  • UK Innovate at the University of Kentucky, Columbia Technology Ventures, the Center for Strategic and International Studies and AUTM host the U.S. Innovation Competitiveness Summit, which begins today. 
  • FCC acting chair Jessica Rosenworcel speaks at an Internet Innovation Alliance event on the Federal Communications Commission’s Emergency Broadband Benefit program and Lifeline program today at 10 a.m.
  • The Stanford Internet Observatory hosts an event on end-to-end encryption proposals at noon on Tuesday. 
  • Bruno Lasserre, the chief justice and vice president of France’s Council of State, discusses online privacy policy at an Atlantic Council event on Wednesday at 9:15 a.m. 
  • The Federal Trade Commission holds its September meeting on Wednesday at 11 a.m. The commission plans to discuss a report on Big Tech’s small acquisitions and other issues.
  • New America’s Open Technology Institute holds an event on high-risk artificial intelligence on Wednesday at 1:30 p.m.

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