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What Does Amazon's New Antitrust Lawsuit Mean?

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May. 26 2021, Published 11:12 a.m. ET

In Washington D.C., Attorney General Karl Racine filed an antitrust lawsuit against Amazon (NASDAQ:AMZN). The matter at hand has to do with whether or not Amazon is strategically monopolizing the e-commerce market.

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What does this mean for Amazon, antitrust rules, and online retail as a whole?

Why AG Racine filed an antitrust lawsuit against Amazon

Racine filed an antitrust lawsuit against Amazon due to what he says is illegal price structuring. He states that sellers on Amazon who charge a lower price for their products elsewhere (including their own websites) get buried in the search results.

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Source: Getty

Washington, D.C. Attorney General Karl Racine

Amazon has retorted the claims of an "artificially high price floor" by suggesting that the company maintains the right to ensure a competitive landscape. Previously, Amazon had a clause for sellers referring to price parity, which outright prohibited lower prices on other sites. The company removed that clause in 2019 and replaced it with one that imposed sanctions for those who breached its "fair pricing policy."

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While Amazon views its actions as wholeheartedly competitive, Racine's office views it in another light. They state, "The effects of these agreements continue to be far-reaching as they harm consumers and third-party sellers, and suppress competition, choice, and innovation."

The effects of these agreements continue to be far-reaching because they harm consumers and third-party sellers, and suppress competition, choice, and innovation.

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Amazon joins Facebook, Google, and Apple in antitrust concerns

Amazon isn't the only tech giant feeling the antitrust heat these days. Apple wrapped up its antitrust trial on May 24 over a case about its 30-percent commission for all App Store and in-app purchases. The issue was spearheaded by Epic Games—the creator of the video game Fortnite

Facebook and Apple are both dealing with an EU (European Union) competition law via the European Commission. The EU has stricter antitrust regulations than the U.S., especially for international corporations like these tech conglomerates.

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Google is facing antitrust proceedings from the German Federal Cartel Office for its own anti-competitive actions.

Many experts say that the road will be slow to wrap up all of these lawsuits, including the latest for Amazon.

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Will the antitrust lawsuit hurt Amazon's bottom line?

Amazon's lawsuit stems from Washington D.C., which gives the company a pretty good chance of beating the matter in court since it isn't a federal matter. This makes the Amazon case much less intense than Facebook, Google, or Apple. Other jurisdictions could get involved, but it's too soon to tell what will go down.

AMZN stock responds marginally to the antitrust news

Amazon stock dropped less than a full percent on May 25 after the news about the lawsuit. Now, the shares have recuperated to the previous level, which shows that investors aren't concerned about the antitrust allegations. This is especially true after the company agreed to acquire MGM Resorts International (NYSE:MGM), whose shares are up 1.75 percent on May 26. AMZN stock is up 2.55 percent YTD despite large swaths of investors selling their tech stocks amid inflation fears.

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