For an online powerhouse that seems unstoppable, Amazon (NASDAQ: AMZN) has a way of ruffling feathers. Earlier this year, New York sued Amazon for its mistreatment of warehouse workers during the height of the coronavirus pandemic. And now, Washington, D.C.'s attorney general has a bone to pick with Amazon as well.
Is Amazon's Marketplace being threatened?
Amazon maintains an extensive network of third-party sellers who can use its Marketplace platform to reach more customers. Those sellers benefit from added visibility, while Amazon gets to enjoy a cut of their sales.
Between 2008 and 2018, the share of Amazon's online third-party sales soared from 30% to 58%. And in 2020, third-party sellers accounted for a whopping $295 billion worth of merchandise sold on Amazon, a 47.5% increase from 2019.
But now, Washington, D.C. Attorney General Karl Racine has filed an antitrust lawsuit against Amazon for fixing retail prices through its Marketplace platform. The complaint alleges that Amazon blocked third-party sellers from offering up their products at lower prices on other websites, or even their own websites.
This isn't the first time Amazon's Marketplace practices have been questioned. Last year, the antitrust subcommittee of the House of Representatives dug into the issue, and it found that Amazon's dual role as an online retailer and third-party marketplace operator creates an inherent conflict of interest.
Of course, Amazon is claiming innocence. The online giant maintains that its third-party sellers set their own prices for the products they offer through Marketplace. But even so, the fact that Amazon is being questioned might lead it to rethink the way it handles its third-party sellers -- and influences product pricing.
Good news for retail stores?
Amazon has been threatening retail shops since it evolved from an online bookseller to the e-commerce equivalent of a big-box store. In fact, it's hard to say how much business Amazon has taken away from mom-and-pop stores and well-known retail chains alike over the course of the past decade or so, but what we do know is that store closures have increased in recent years -- even before the coronavirus pandemic struck and pushed that trend along.
If Amazon is forced to rethink its pricing structure, it could help physical stores remain more competitive. And that could, in turn, prevent additional closures to some degree, thereby saving malls and shopping centers from a major tenant vacancy crisis.
There's already concern among mall REIT (real estate investment trust) investors that continued store closures will drive malls into the ground. But if Amazon is put in its place, that could change the landscape of physical retail and keep more stores up and running.
The Millionacres bottom line
It's too soon to know what will come of the aforementioned lawsuit, and Amazon will no doubt sink as many resources as it needs to into fighting it. But either way, one message is clear: Amazon may be a major force to reckon with, but it's not above the law. And clearly, those in power to put the online giant in its place won't hesitate to do so.