Calif. AG Defends Amazon Complaint as Demurrer Hearing Nears

Contrary to how Amazon’s Dec. 6 demurrer “mischaraterizes” California attorney general’s antitrust complaint against the company (see 2212160020), the state has stated “viable claims for violation” of the Cartwright Act and the California Unfair Competition Law (UCL), said California’s opposition to the demurrer, dated Jan. 27 and accessed Tuesday (docket CGC-22-601826) in San Francisco County Superior Court.

A demurrer under California law argues a complaint should be dismissed because it fails to assert facts sufficient to support a cause of action. An in-person hearing on Amazon’s demurrer is set for March 7 at 9 a.m. PST.

The Cartwright Act prohibits only "concerted action" in restraint of trade, not the "unilateral pricing" and promotional policies that are the focus of the complaint by AG Rob Bonta (D), said Amazon’s demurrer. But Bonta’s Cartwright Act claim “is not premised on unilateral conduct,” said the state’s opposition. “It is well-grounded on specific factual allegations detailing the express agreements Amazon requires third-party sellers and wholesale suppliers to enter.”

Amazon’s agreements “have both the purpose and effect of interfering with free-market price competition,” said California’s opposition. The complaint “pleads facts demonstrating that these unlawful agreements directly interfere with price competition, giving rise to a per se violation of the Cartwright Act under the controlling California Supreme Court decisions” in relevant case law, it said.

Even in the absence of a per se violation, the facts pleaded in the complaint “demonstrate that Amazon’s unlawful agreements have a substantially anticompetitive effect, creating a price floor that insulates Amazon from price competition,” said the state’s opposition. “Amazon is thus able to extract higher overall fees and greater margins than in a competitive market free of unlawful restraints,” it said. These higher fees and margins “are passed along to consumers resulting in higher prices on and off Amazon,” it said.

These facts “are more than sufficient to state a Cartwright Act claim under any analysis along the ‘sliding scale’ continuum outlined by the California Supreme Court,” said the state. Compounding the harm to consumers is “the direct evidence that third-party sellers and wholesale suppliers do raise prices and withhold product selection to comply with Amazon’s unlawful agreements,” it said.

Even in the absence of a Cartwright Act violation, the complaint alleges facts sufficient to state a claim for violation of the UCL’s “unfair” prong, said the state. “As an initial matter, Amazon’s perfunctory argument fails to address two of the three separate tests that California courts apply to analyze ‘unfair’ prong claims as recognized by the California Supreme Court.” Under each of those tests, the complaint “states a viable UCL claim,” it said.