(CNN Business) California's attorney general sued Amazon on Wednesday, alleging the company has forced third-party sellers to offer only their lowest prices in listings with the e-commerce giant and harming competition in the process.
The complaint filed in San Francisco Superior Court takes aim at contractual language Amazon (AMZN) uses with third-party sellers that commits them to "price parity."
"Merchants must agree not to offer lower prices elsewhere — including competing sites like Walmart, Target, eBay, and, in some cases, even on their own websites," the office of California Attorney General Rob Bonta said in a release. Penalties for violating the agreement allegedly include fees or losing the opportunity to be featured prominently in Amazon product listings.
Because other retailers can't offer prices lower than on Amazon, consumers are forced to pay prices that are artificially inflated by Amazon's contracts, the complaint alleges.
It also cites a finding by German competition regulators that Amazon's contract language "resulted in significant price increases in e-commerce" in that market.
In a statement to CNN, Amazon said, "the California Attorney General has it exactly backwards. Sellers set their own prices for the products they offer in our store. Amazon takes pride in the fact that we offer low prices across the broadest selection, and like any store we reserve the right not to highlight offers to customers that are not priced competitively. The relief the AG seeks would force Amazon to feature higher prices to customers, oddly going against core objectives of antitrust law." The company called on the court to dismiss the suit "promptly."
The complaint calls for a court order blocking Amazon from what California claims are anticompetitive contracts, as well as fines and disgorgement of Amazon's allegedly ill-gotten gains through the agreements.
Chamber of Progress, a tech industry-backed advocacy group, said Califoirnia's suit, if successful, could "force Amazon to raise prices."
"That makes no sense while consumers shop for bargains to counter inflation," said Adam Kovacevich, the group's CEO, adding that a similar suit by Washington, DC's attorney general was dismissed last year by the Superior Court of the District of Columbia.