Racine Testifies at Senate Hearing on Anticompetitive Policies
December 09, 2021
D.C. Attorney General Karl A. Racine was among those who testified on December 7 before the Senate Subcommittee on Fiscal Responsibility and Economic Growth in a hearing entitled “Promoting Competition, Growth, and Privacy Protection in the Technology Sector.” Racine specifically discussed litigation his office has pursued against the online marketplace Amazon.
In her opening remarks as subcommittee chair, Senator Elizabeth Warren described an economy whose lack of regulation since the 1970s has resulted in corporate monoliths with little incentive to address supply chain deficiencies or poor labor treatment, and enough market share to absorb smaller competitors and engage in price gouging. “The effects of limited competition in our technology sector are particularly severe,” she said, pointing to the example of silicon chip supply chain issues exacerbated by anticompetitive activity. “It doesn’t have to be like this.”
Amazon’s labor and commercial practices in particular were the subject of a substantial portion of the conversation, which included testimony from Courtenay Brown, an Amazon fulfillment center worker who detailed poor working conditions and treatment.
In May, Racine’s office filed District of Columbia v. Amazon.com, Inc., alleging anticompetitive business practices by the online superstore in violation of the District’s Antitrust Act. Businesses wishing to sell on the company’s platform must agree to Amazon’s standard Business Solutions Agreement, which includes a clause prohibiting the sale of products on competing retail sales platforms at a lower price or on better terms than those offered on Amazon.
This “price parity provision” functioned as an anticompetitive restraint, Racine said, resulting in Amazon’s ability to effectively control the prices of goods to the consumer’s disadvantage. The lawsuit argues that “competition and consumers were directly harmed by virtue of higher prices, as well as through the loss of choice, innovation, and competition among online retail sales platforms.”
When the price parity provision came under congressional scrutiny in 2019, the company withdrew the clause from its contracts, but Racine said Amazon quickly replaced it with a “fair pricing policy” that the lawsuit alleges is nearly identical in its nature and impact, given the restriction on sale at a lesser price elsewhere and an up to 40 percent increase in product prices that can result from the surcharges and fees imposed by Amazon.
Racine presented figures relating to Amazon’s revenues in order to establish the scale of the company’s price control impact. “Between 2014 and 2020, Amazon's revenue from third-party seller fees and charges grew from $11.75 billion to over $80 billion. This year, Amazon is estimated to reap over $121 billion in fees from third-party sellers. They're doing this because it's extremely profitable. They don't care that consumers are paying far too much for goods, and they are not doing what they say they're doing, which is focusing 100 percent on consumers. They're focused 100 percent on utilizing their market power to extract every bit of profit that they can,” he said.
While asserting a personal belief in capitalism, Racine drew a line at Amazon’s activities. Acknowledging the right to generate a profit and benefit from one’s hard work and entrepreneurship, Racine said that “when companies like Amazon unfairly and unlawfully increase the prices on all of us, stifle competition, and take advantage of consumers, the law must step in and say ‘enough is enough.’”
Ranking Senator William Cassidy’s introduction focused on another issue regarding tech giants — privacy, specifically within the data broker industry — raising concerns that both corporate actors and foreign powers might collect and abuse data on groups and individuals. The panel of speakers addressing the committee affirmed the data privacy concerns raised by Senator Cassidy, describing a marketplace for information in which anyone from a private company to a foreign power might be able to acquire information easily, or use technology to widely distribute misinformation.
At the close of proceedings, Senator Warren called for a recommitment to corporate regulation. She said that the nation finds itself at an inflection point. “It’s time for Congress to finally update our antitrust laws,” she said. “We should ban all mergers involving huge corporations. The biggest companies need to compete on the merits. They need to offer better products, better prices, better service . . . not just buy up their rivals and then gouge consumers.”
Secondly, Warren said it is time to give antitrust agencies “better tools to break up the anticompetitive deals that are most harmful to our economy, like Facebook’s acquisition of Instagram.” And, finally, Warren stressed that competition policy must safeguard the country’s workforce. “Those deal synergies that reduce corporate costs often come out of the hides of its workers,” she said.
