Case 2:21-cv-00693-RSM Document 59 Filed 01/24/23 Page 1 of 11
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`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF WASHINGTON
`AT SEATTLE
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`Case No. C21-693RSM
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`ORDER GRANTING IN PART AND
`DENYING IN PART MOTION TO
`DISMISS
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`ELIZABETH DE COSTER et al., on behalf of
`themselves and all others similarly situated,
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` Plaintiffs,
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` v.
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`AMAZON.COM, INC., a Delaware
`corporation,
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` Defendant.
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`I.
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` INTRODUCTION
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`This matter comes before the Court on Defendant Amazon.com, Inc. (“Amazon”)’s
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`Motion to Dismiss, Dkt. #35. Plaintiffs have filed an opposition brief, Dkt. #39. The parties
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`have filed numerous notices of supplemental authority. Dkts. #44, #45, #47, #51, #52, and #55.
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`The Court can rule on this Motion without oral argument. For the reasons stated below,
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`the Court GRANTS IN PART AND DENIES IN PART Amazon’s Motion.
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`II.
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`BACKGROUND
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`For purposes of this 12(b)(6) Motion, the Court will accept all facts in the Consolidated
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`Amended Complaint (“CAC” or “Amended Complaint”), Dkt. #20, as true. Unless stated
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`otherwise, the following facts are drawn from that pleading.
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`Defendant Amazon operates the largest online retail marketplace in the United States.
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`Amazon sells its own goods, but also designed its marketplace to be a platform where third-
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`party merchants can register and list their goods for Amazon to sell.
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`Case 2:21-cv-00693-RSM Document 59 Filed 01/24/23 Page 2 of 11
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`Third-party merchants post their products on the platform, which Amazon presents to
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`users together with its own goods according to a certain algorithm that takes the form of a
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`ranking list.
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`At the time the pleading was drafted, Amazon’s marketplace accounted for over 50% of
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`all online retail sales revenue in the United States. By comparison, Amazon’s two closest
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`competitors, eBay and Walmart, accounted for only 6.1% and 4.6%, respectively, of that
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`revenue.
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`Many third-party merchants listing their goods on Amazon’s marketplace also sell their
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`goods on other platforms—including on their own websites and on competing online
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`marketplaces.
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`Amazon competes both (a) as a retailer against the third-party merchants that list their
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`goods on Amazon’s marketplace, and (b) as a marketplace, against other online retail
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`marketplaces, such as eBay and Walmart, where third-party merchants can list their goods.
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`Amazon is critical to the financial success of its third-party merchants. Almost half of
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`the third-party merchants who list their goods on Amazon’s marketplace generate between 81%
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`and 100% of their revenues on it.
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`The Amended Complaint asserts that Amazon charges higher fees for third-party
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`merchants than competitor marketplaces and that these inflated fees are passed on to customers
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`like Plaintiffs through higher prices.
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`In a competitive market, third-party merchants would be able to sell their products for
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`less in competitor marketplaces. Amazon bars this type of competition by imposing on third-
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`party merchants Platform “Most Favored Nation (“MFN”) policies, or did so during the
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`relevant time period. Amazon’s MFN policies forbid third-party merchants from listing their
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`goods anywhere else on the internet at prices lower than their Amazon list prices.
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`An investigation by the House of Representatives Judiciary Committee’s Subcommittee
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`on Antitrust, Commercial, and Administrative Law (the “House subcommittee on antitrust”)
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`found that “Amazon has a history of using MFN clauses to ensure that none of its suppliers or
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`third-party sellers can collaborate with an existing or potential competitor to make lower-priced
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`or innovative product offerings available to consumers.”
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`Amazon imposes its MFN policies on third-party merchants through the Amazon
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`Business Solutions Agreement (BSA). Every third-party merchant that registers to list goods
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`on Amazon’s marketplace must “agree[] to the terms of the [BSA] and the policies
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`incorporated in that agreement.”
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`Until March 2019, Amazon enforced its MFN policies through BSA’s “Price Parity
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`Clause,” which expressly prohibited third-party merchants from listing goods on other online
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`retail platforms—whether marketplaces or single-merchant websites—at prices lower than their
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`Amazon list prices. In late 2013, because of German and United Kingdom antitrust
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`proceedings, Amazon voluntarily abandoned its price parity clause on an EU-wide basis.
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`Amazon continued to enforce that clause in the United States for six more years.
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`Even after withdrawing this clause, Amazon continues to enforce MFN-type policies
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`through its so-called “Fair Pricing” Policy. This policy in the BSA states that, if a third-party
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`merchant engages in pricing practices with regard to “a marketplace offer that harms customer
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`trust,” Amazon may impose sanctions. According to the policy, a “pricing practice that harms
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`customer trust” occurs if a merchant lists goods on a competing online retail platform at prices
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`that are significantly below its Amazon list prices. Sanctions include making the merchant’s
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`product ineligible for a feature (the “Buy Box” button) that would make the product the most
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`visible and easiest to purchase among similar goods; removing the third-party merchant’s
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`goods from Amazon’s marketplace; suspending shipping options for the merchant’s goods; and
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`terminating or suspending the merchant’s ability to have any goods sold on Amazon’s
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`marketplace.
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`The intent and effects of the “Fair Pricing” Policy are the same as those of the former
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`Price Parity Clause. These effects can be anticompetitive by, e.g., preventing merchants from
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`listing their goods at lower prices on other platforms that charge lower (or no) fees, and
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`preventing other online retail marketplaces from competing with Amazon by hosting those
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`third-party merchants’ products at lower prices. Taking these pled facts as true, Amazon’s
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`MFN policies cause Amazon customers to pay more for goods purchased on its marketplace
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`than they would pay in a competitive market.
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`Amazon enforces these policies by, e.g., systematically monitoring the prices listed by
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`third-party merchants on other online retail platforms.
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`Named Plaintiffs are residents of Maryland, Washington, D.C., Illinois, Texas,
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`Tennessee, and Connecticut who purchased numerous goods from Amazon’s marketplace,
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`including those listed by third-party merchants. They bring this action on behalf of themselves,
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`and as a class action on behalf of all persons who, on or after May 26, 2017, purchased one or
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`more goods on Amazon’s marketplace.
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`The Amended Complaint includes causes of action for per se and not per se violation of
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`the Sherman Act under 15 U.S.C. § 1 (First and Second Causes of Action), violation of the
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`Sherman Act under 15 U.S.C. § 2 for monopolization (Third Cause of Action), and violation of
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`the Sherman Act under 15 U.S.C. § 2 for attempted monopolization (Fourth Cause of Action).
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`A. Legal Standard under Rule 12(b)(6)
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`III. DISCUSSION
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`In making a 12(b)(6) assessment, the court accepts all facts alleged in the complaint as
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`true, and makes all inferences in the light most favorable to the non-moving party. Baker v.
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`Riverside County Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009) (internal citations omitted).
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`However, the court is not required to accept as true a “legal conclusion couched as a factual
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`allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
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`550 U.S. 544, 555 (2007)). The complaint “must contain sufficient factual matter, accepted as
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`true, to state a claim to relief that is plausible on its face.” Id. at 678. This requirement is met
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`when the plaintiff “pleads factual content that allows the court to draw the reasonable inference
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`that the defendant is liable for the misconduct alleged.” Id. The complaint need not include
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`detailed allegations, but it must have “more than labels and conclusions, and a formulaic
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`recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Absent
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`facial plausibility, a plaintiff’s claims must be dismissed. Id. at 570.
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`B. Analysis
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`Amazon’s first argument for dismissal is that its MFN policies are legal as a matter of
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`law. Dkt. #35 at 16. Amazon recharacterizes the policies found in the Amended Complaint as
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`a “Retail Competitive Price Provision” and an “Anti-Gouging Policy.” Id. Amazon argues that
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`its policies “provide for competitive prices to consumers, rather than for itself” and that “[n]o
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`court has ever condemned competitive price policies like these.” Id.
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`The fact that no Court has ever found a policy like these to violate the Sherman Act
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`does not, in itself, render these claims implausible. Amazon goes on to argue that certain cases
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`have found that “competitive price provisions favoring consumers… do not violate the antitrust
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`laws.” Id. (citing Kartell v. Blue Shield of Mass. Inc., 749 F.2d 922, 928-29 (1st Cir. 1984)).
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`The Court finds that the facts alleged in this case are not sufficiently analogous to those
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`in Kartell or its progeny of insurance cases. Making all inferences in the light most favorable
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`to the non-moving party, Plaintiffs’ facts are adequate to escape the legal conclusions of those
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`cases. To the extent Amazon is asking the Court to construe the facts in an unfavorable light,
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`such is contrary to Rule 12(b)(6) and premature given the undeveloped factual record. See,
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`e.g., Dkt. #35 at 18-19 (“…to the extent Plaintiffs’ claims are based on the MFPP, they should
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`be dismissed because the CAC’s characterization of the policy as an MFN is demonstrably
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`incorrect…. The Court should hold the MFPP procompetitive as a matter of law because it
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`benefits consumers”).
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`Amazon’s second point is that the First Cause of Action fails to allege any “concerted
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`action.” Id. at 19. It argues “[c]ourts routinely dismiss Section 1 claims where the claim rests
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`only on one party’s establishment or enforcement of contract terms or policies that another
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`party is required to follow.” Id. at 20. Amazon cites to, inter alia, Sambreel Holdings LLC v.
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`Facebook, Inc., 906 F. Supp. 2d 1070, 1076 (S.D. Cal. 2012) where “the plaintiff alleged that
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`Facebook’s contract with Application Developers ‘includes a provision that obligates
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`Application Developers to use only the Advertising Partners that have been approved by
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`Facebook,’ and…. The court held the complaint lacked ‘sufficient facts to support the
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`allegation that there was concerted effort among the Application Developers and Facebook, as
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`is required by the express terms of Sherman Act § 1, as opposed to unilateral action on the part
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`of Facebook.’” Id. Plaintiffs respond that “Amazon seeks to pass off its binding agreements
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`containing price restrictions with third-party merchants as if the conduct at issue were nothing
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`more than Amazon’s own ‘independent’ or ‘unilateral’ conduct…. But here the third-party
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`merchants are active participants in the price restraint, even if Amazon is the one driving it.”
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`Dkt. #39 at 17. Plaintiffs run through Amazon’s other cited cases supporting its argument and
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`conclude:
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`These cases do not control here, because Amazon’s MFN policies
`are neither vertical price restraints (they do not place conditions on
`the resale of Amazon’s own products), nor intrabrand price
`restraints (they restrain competitive pricing across all brands and
`unbranded goods that third-party merchants sell on Amazon’s
`platform, even though produced and supplied by companies other
`than Amazon). Put simply, Amazon and each third-party merchant
`has entered into a horizontal price-fixing agreement that controls
`how third-party merchants set prices for goods that directly
`compete with Amazon’s goods. The merchants participate in this
`conduct—albeit unwillingly—by setting prices in compliance with
`the agreed-upon price restraint. This conduct plainly satisfies the
`requirement of a concert of action under Section 1.
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`Id. at 19–20.
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`For purposes of this Motion to Dismiss, the Court agrees with Plaintiffs that Amazon
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`has failed to demonstrate a lack of concerted action, or that concerted action is implausible.
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`Taking the facts in the light most favorable to Plaintiffs, the third-party merchants are active
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`participants who set their prices and otherwise engage with Amazon’s policies in an active,
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`albeit allegedly unwilling, way. This affects horizontal competitors in a unique way not
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`analogous to the cases cited by Amazon.
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`Amazon next maintains that the third cause of action, for per se violation of Section 1,
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`should be dismissed because that rule is limited to agreements between horizontal competitors.
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`Dkt. #35 at 21–22. Per se liability is reserved for only those agreements that are “so plainly
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`anticompetitive that no elaborate study of the industry is needed to establish their illegality.”
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`Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006) (citing National Soc. of Professional Engineers v.
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`United States, 435 U.S. 679, 692, 98 S. Ct. 1355, 55 L. Ed. 2d 637 (1978)). “Price-fixing
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`agreements between two or more competitors, otherwise known as horizontal price-fixing
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`agreements, fall into the category of arrangements that are per se unlawful.” Id.
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`Plaintiffs argue that “[a]ll the Supreme Court requires for per se liability is an
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`agreement among ‘competing retailers’ to ‘reduce[] competition in order to increase price.’”
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`Dkt. #39 at 20 (citing Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 893 (2007)).
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`Plaintiffs do not allege there is an agreement among competing retailers to reduce
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`competition in order to increase price. The facts are significantly more complicated than that.
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`The Amended Complaint essentially includes the “elaborate study of the industry”
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`contemplated by the Court in Texaco, supra. As the Court understands it, Plaintiffs allege an
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`unfavorable agreement between Amazon and third-party retailers who use its marketplace, not
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`between Amazon and competing marketplaces. That Amazon and the third-party retailers
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`sometimes compete within the Amazon marketplace adds a layer of complexity, it does not
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`clarify liability. Per se liability is not available on these facts. Accordingly, this cause of
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`action is properly dismissed under Rule 12(b)(6).
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`Fourth, Amazon argues Plaintiffs “fail to allege facially plausible product markets.”
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`Dkt. #35 at 25. More specifically, Amazon alleges that Plaintiffs have “unnaturally
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`gerrymandered” the relevant market by “excluding physical retailers,” id., and that Plaintiffs’
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`relevant market “includes products that are not reasonably interchangeable,” id. at 27.
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`“Under the rule of reason, plaintiffs must plead a relevant market to state an antitrust
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`claim under Sections 1 or 2 of the Sherman Act.” PBTM LLC v. Football Nw., LLC, 511 F.
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`Supp. 3d 1158, 1179 (W.D. Wash. 2021). A “complaint may be dismissed under Rule 12(b)(6)
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`if the complaint’s ‘relevant market’ definition is facially unsustainable.” Hicks v. PGA Tour,
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`Inc., 897 F.3d 1109, 1120 (9th Cir. 2018) (internal quotation marks omitted).
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`Plaintiffs counter Amazon’s intense and thorough legal arguments on this point with the
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`following:
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`… the CAC plausibly alleges two alternative markets: an Online
`Retail Marketplace Market and an Online Retail Sales Market.
`CAC ¶¶ 64- 139. The Online Retail Marketplace Market is made
`up of online platforms, like eBay and Walmart, that provide the
`services “that enable consumers to buy retail goods listed by
`multiple independent sellers.” Id. ¶ 64. The Online Retail Sales
`Market includes all online retail sales. Id. ¶ 69. The contours of
`these two markets are well supported by Plaintiffs’ allegations and
`by economic consensus.
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`Dkt. #39 at 23. Plaintiffs say Amazon is prematurely attacking the facts, and that the proper
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`test at this stage is whether Plaintiffs’ markets are “facially unsustainable.” Id. (citing Newcal
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`Indus. v. Ikon Office Solution, 513 F.3d 1038, 1045 (9th Cir. 2008)).
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`The Court finds the relevant market definitions in the Amended Complaint sustainable
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`on their face. Amazon’s arguments are fact-based and premature, essentially asking the Court
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`to hear expert testimony at the motion-to-dismiss stage of litigation. That is not how civil
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`litigation is supposed to proceed and will not serve as a basis for dismissal under Rule 12(b)(6).
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`Fifth, Amazon assert that “Plaintiffs allege a multi-step causal chain of injury that is too
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`attenuated to plausibly allege antitrust injury.” Dkt. #35 at 30. Amazon characterizes Plaintiffs
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`claims thusly:
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`Plaintiffs contend that Amazon’s alleged MFN policies first,
`“nullified competition by other online retail marketplaces on the
`basis of fees,” which, second, allegedly caused “Amazon to
`continue to charge supracompetitive fees for the use of its
`marketplace.” CAC ¶ 102. Plaintiffs then allege that, third, “third-
`party merchants would rationally have set lower prices for their
`goods on their own websites and on competing online retail
`marketplaces with lower fees.” Id. Fourth, “in turn, competing
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`Id. at 30–31.
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`online retail marketplaces would have lowered their fees to
`compete with Amazon on price, or—if their fees were already
`lower—better succeeded at driving marketplace-level competition
`by attracting more third-party merchants and more consumers.” Id.
`Fifth, Plaintiffs allege “these market forces would have resulted in
`competitive pressure that would have forced Amazon to lower its
`fees,” and sixth, “to lower the prices for its own goods.” Id. Based
`on this six-step chain of causation, Plaintiffs allege Amazon has
`“kept overall prices high on its marketplace and, therefore, across
`all online retail marketplaces.” Id.
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`The Court finds that Plaintiffs’ allegations, although complicated, are not as
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`complicated as Amazon would have it and are not too attenuated to plausibly allege antitrust
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`injury. In the light most favorable to the nonmoving party, this causal chain could be
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`summarized as Plaintiffs put forth in their Response brief: “Amazon’s MFN policies restrain
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`competition in ways that cause consumers to pay supra-competitive prices directly to Amazon.”
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`Dkt. #39 at 30. Plaintiffs point to Apple v. Pepper, 139 S. Ct. 1514, 1519 (2019) as factually
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`analogous. Plaintiffs argue that “Amazon’s argument that third-party merchants make
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`‘independent pricing decisions’ also defies the CAC, which alleges that Amazon uses its MFN
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`policies to block third-party merchants from making truly independent pricing decisions. Id. at
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`31 (citing CAC ¶¶ 100-121). Plaintiffs’ point is plausible.
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`Finally, Amazon contends that Plaintiffs’ injuries arise from “conduct in a different
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`market,” i.e. Plaintiffs paid supra-competitive prices for retail goods based on Amazon’s
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`actions in a different market toward different actors—policies applied and fees charged to
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`third-party sellers. Dkt. #35 at 32. “Where plaintiffs allege injury in a market other than the
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`market in which anticompetitive conduct is alleged to occur, courts dismiss antitrust claims for
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`lack of antitrust standing.” Id. (citing Feitelson v. Google Inc., 80 F. Supp. 3d 1019, 1027-28
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`(S.D. Cal. 2015) (“Plaintiffs allege that they suffered antitrust injury in the form of
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`supracompetitive pricing in Android phones, which is not the market in which the alleged
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`anticompetitive conduct occurred.”)
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`The Court finds that Plaintiffs allege a valid injury here, even if third-party merchants
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`also have their own cause of action for lost profits. See In re DDAVP Direct Purchaser
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`Antitrust Litig., 585 F.3d 677, 688 (2d Cir. 2009).
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`IV. CONCLUSION
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`Having reviewed the relevant pleadings and the remainder of the record, the Court
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`hereby finds and ORDERS:
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`1) Defendant Amazon’s Motion to Dismiss, Dkt. #35 is GRANTED with respect to
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`Plaintiffs’ First Cause of Action. Plaintiffs’ First Cause of Action, for Violation of
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`the Sherman Act 15 U.S.C. § 1 Per Se, is DISMISSED. Although leave to amend
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`would typically be granted, it is not granted here as Plaintiffs would have to
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`significantly re-work the pleadings in order to bring this claim. Plaintiffs may move
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`for leave to amend if they so choose. The Motion is DENIED as to all other claims.
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`2) The parties are to promptly propose a class certification briefing schedule. See Dkt.
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`#41.
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`DATED this 24th day of January, 2022.
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`A
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`RICARDO S. MARTINEZ
`UNITED STATES DISTRICT JUDGE
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