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`UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF WASHINGTON
`SEATTLE DIVISION
`
`MEGAN SMITH, on behalf of herself and
`all others similarly situated,
`Plaintiff,
`
`Case No. 2:21-cv-00838
`
`
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`CLASS ACTION COMPLAINT
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` DEMAND FOR JURY TRIAL
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` v.
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`AMAZON.COM, INC.,
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`Defendant.
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` PHILLIPS LAW FIRM, PLLC
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` 17410 133rd Ave. N.E., Suite 301
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` Woodinville, Washington 98072
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` TEL. 425.482.1111.
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`Class Action Complaint
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`TABLE OF CONTENTS
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`INTRODUCTION ..................................................................................................... 1
`JURISDICTION AND VENUE ................................................................................ 3
`PARTIES ................................................................................................................... 4
`FACTUAL ALLEGATIONS .................................................................................... 4
` A. Amazon: Paradise Lost .................................................................................. 4
` i. Amazon’s Predatory Pricing ..................................................................... 5
` ii. Amazon’s Unfair Conditions With Merchants ........................................ 7
`INTERSTATE TRADE AND COMMERCE ........................................................... 9
`RELEVANT MARKET ............................................................................................ 9
`CLASS ACTION ALLEGATIONS ........................................................................ 10
`ANTITRUST INJURY ............................................................................................ 13
`CAUSES OF ACTION ............................................................................................ 13
`PRAYER FOR RELIEF .......................................................................................... 19
`JURY TRIAL DEMAND ........................................................................................ 20
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` PHILLIPS LAW FIRM, PLLC
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` TEL. 425.482.1111.
`CLASS ACTION COMPLAINT - i
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`Case 2:21-cv-00838 Document 1 Filed 06/23/21 Page 3 of 22
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`Plaintiff MEGAN SMITH, on behalf of herself and all others similarly
`situated (“Plaintiff”), by and through her undersigned attorneys, brings this Class
`Action Complaint (the “Action”) against Defendant AMAZON.COM, INC.
`(“Amazon” or “Defendant”) based upon personal knowledge as to herself and her
`own acts, and as to all other matters upon information, investigation, and belief of
`counsel.
`
`INTRODUCTION
`In 1890, on the floor of the United States Senate, while trying to pass
`1.
`the Sherman Antitrust Act, Senator Sherman of Ohio, stated that “overcharges by
`monopolists [are a form of] ‘extortion which makes the people poor.”’1 Amazon, a
`digital e-commerce marketplace founded by Jeff Bezos, is such a monopolistic
`entity, and its policy of overcharging consumers is woven into the fabric of
`Amazon’s existence.
`Like Standard Oil and the robber-barons of old, “Amazon is the titan of
`2.
`twenty-first century commerce. In addition to being a retailer, it is now a marketing
`platform, a delivery and logistics network, a payment service, a credit lender, an
`auction house, a major book publisher, a producer of television and films, a fashion
`designer, a hardware manufacturer, and a leading host of cloud server space.”2
`This Action focuses solely on Amazon’s role as a digital retailer – an
`3.
`online distribution channel for its own goods, as well as goods offered by merchants
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`who come to Amazon to sell their products not out of choice, but out of necessity.
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`Amazon has monopoly power as an online distribution channel in the United States
`(the “Relevant Market”), with approximately 50% of all e-commerce sales occurring
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`1 21 CONG. REC. 2461 (1890) (statement of Sen. Sherman)cited by Khan, Lina, “Amazon’s
`Antitrust Paradox,” YALE LAW JOURNAL, Vol. 126, No. 3 (Jan. 2017) (hereinafter “Khan”).
` Id.
`
` 2
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` PHILLIPS LAW FIRM, PLLC
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` Woodinville, Washington 98072
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` TEL. 425.482.1111.
`CLASS ACTION COMPLAINT - 1
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`through Amazon’s website, Amazon.com.34 After the Novel Coronavirus-19
`pandemic (“COVID-19”) emerged, Amazon’s monopolistic grasp over the Relevant
`Market grew – as Amazon’s sales skyrocketed by 38% in 2020.5
`Amazon uses its pervasiveness over the Relevant Market to abuse
`4.
`consumers and merchants alike. Amazon does this by imposing “referral fees,”
`which are essentially commissions, that Amazon charges its merchants to be able to
`sell goods on the Amazon.com platform. These merchants then include these
`commissions in their prices which are paid by Plaintiff and the Class directly to
`Amazon. In a normal competitive and functioning market, merchants would charge
`a lesser, more competitive price on Amazon than they would absent the “referral
`fees.”
`Additionally, Amazon imposes a “price parity clause” (commonly
`5.
`known as a Most Favored Nations clause, or “MFN”) on merchants through its
`“Amazon Services Business Solutions Agreement.” Under threat of government
`action by the Federal Trade Commission, in 2019, Amazon purportedly withdrew
`its “price parity clause,” only to be replaced with its “Fair Pricing Policy”
`(hereinafter “FPP”). The FPP currently exists and has the same effect as an MFN.
`The MFN forbids merchants from being able to sell their goods at cheaper prices on
`other e-commerce platforms within the Relevant Market. This, in effect, fixes,
`
`
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`3 Ingrid Lunden, Amazon’s share of the US e-commerce market is now 49%, or 5% of all retail
`
`spend, TECHCRUNCH (July 13, 2018) at https://techcrunch.com/2018/07/13/amazons-share-of-
`the-us-e-commerce-market-is-now-49-or-5-of-all-retail-
`spend/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer
`_sig=AQAAAH_RRrESwhO-iyIf_c0DM_1jT-E60-0WHlj05YQDiqJmN4GLi-
`q5bVJs3pbQAl7r5Ozph3wxGfPkoJfCamx8LcBBCvJvVjHEiGFZAt_2h2Lr_fRZNceqWPZiAr2
`TE8IC0vQEoIelXhZGJh2H7Sm3CIOVF879qU5GDsqyxinBbR6V.
` Amazon and Walmart Are Nearly Tied in Full-Year Share of Retail Sales, PYMNTS (Mar. 11,
`
`2021) at https://www.pymnts.com/news/retail/2021/amazon-walmart-nearly-tied-in-full-year-
`share-of-retail-sales/.
` Amazon.com, Inc., Form 10-k Securities and Exchange Commission Annual Report, Fiscal
`Year Ended Dec. 31, 2020 (last visited June 15, 2021) (hereinafter, “Amazon 2020 10-k”)
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` PHILLIPS LAW FIRM, PLLC
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` 17410 133rd Ave. N.E., Suite 301
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` Woodinville, Washington 98072
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` TEL. 425.482.1111.
`CLASS ACTION COMPLAINT - 2
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`stabilizes, and/or increases the prices of goods sold on alternative e-commerce
`platforms. Amazon imposes significant fees for the use of its platform, including a
`subscription fee and referral fees on the sale of each product which inflate the price
`for goods sold by merchants on Amazon and are imposed on consumers on other
`platforms via the MFN.6
`Amazon is also a horizontal competitor to merchants, as it sells the very
`6.
`same goods that merchants sell on the Amazon.com platform. And, because the
`merchants’ goods are overpriced due to the existence of the “referral fees,” Amazon
`is able to undercut the merchants’ prices with its own Amazon-label branded goods
`– vanquishing competition and eliminating consumer freedom to purchase the goods
`they seek in a normal functioning market free of anticompetitive conduct.
`By this Action, Plaintiff, on behalf of herself and other consumers,
`7.
`seeks monetary damages in the form of restitution and treble damages for injuries
`sustained by Amazon’s unlawful conduct, as well as injunctive relief enjoining
`Amazon from continuing its anticompetitive conduct alleged herein.
`JURISDICTION AND VENUE
`This Court has subject-matter jurisdiction over Plaintiff’s federal
`8.
`antitrust claims pursuant to the Sherman Act and the Clayton Antitrust Act, 15
`U.S.C. §§ 1, 2, 15(a); and 28 U.S.C. §§ 1331 and 1337.
`9.
`This Court has personal jurisdiction over the Defendant. Defendant is
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`headquartered in this District. Defendant has engaged in sufficient minimum
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`contacts with and has its principal place of business in the State of Washington.
`10. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) because
`Defendant maintains its principal places of business in the State of Washington and
`in this District, because a substantial part of the events or omissions giving rise to
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`6 Going forward, all references hereafter to the MFN includes the FPP and the price parity clause.
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` PHILLIPS LAW FIRM, PLLC
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` 17410 133rd Ave. N.E., Suite 301
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` Woodinville, Washington 98072
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` TEL. 425.482.1111.
`CLASS ACTION COMPLAINT - 3
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`Plaintiff’s claims occurred in this District. In the alternative, personal jurisdiction
`and venue also may be deemed proper under Section 12 of the Clayton Antitrust Act,
`15 U.S.C. § 22, because the Defendant may be found in or transact business in this
`District.
`
`PARTIES
`11. Plaintiff. Megan Smith is an individual residing in Tennessee who
`made purchases on Amazon’s digital e-commerce platform, Amazon.com, during
`the relevant time period. Plaintiff was and will continue to be economically harmed
`by the Defendant’s anticompetitive conduct alleged herein.
`12. Defendant. Amazon.com, Inc. is an e-commerce channel and retail
`giant with its principal place of business located in the State of Washington. Amazon
`directly sells its own goods to consumers like Plaintiff. Amazon also allows
`merchants to sell products on its online retail sales platform and Amazon charges
`supracompetitive prices for the goods sold on the Amazon.com platform.
`FACTUAL ALLEGATIONS
`A. Amazon: Paradise Lost
`In 1994, Jeff Bezos conceptualized Amazon on a cross country road
`13.
`trip from Seattle to New York City. During his tenure as Chief Executive Officer,
`Amazon’s growth over the last thirty years has been unimaginable, including that
`Amazon’s digital marketplace has grown from exclusively offering books to selling
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`an immense variety of goods. What began in Bezos’ garage in 1994 quickly grew to
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`a dominant digital marketplace offering goods in the following categories:
`electronics, computers, smart home devices, home/garden & tools, pet supplies, food
`& groceries, beauty & health products, toys/kids & baby products, handmade goods,
`sporting goods, outdoors goods, and automotive & industrial materials.7
`
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`7 Amazon.com, Inc. at https://www.amazon.com/, (last visited June 15, 2021).
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` PHILLIPS LAW FIRM, PLLC
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` 17410 133rd Ave. N.E., Suite 301
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` Woodinville, Washington 98072
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` TEL. 425.482.1111.
`CLASS ACTION COMPLAINT - 4
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`14. Because of Amazon’s market power in the Relevant Market, the
`merchants of the aforementioned goods (in each of their respective categories) have
`no choice but to sell on the Amazon.com platform. This makes Amazon a
`monopsony.8 A monopsony, “in economic theory, [is a] market situation where there
`is only one buyer …. Such a firm is able to pay lower wages than it would under
`competition.”9 This is exactly what Amazon does. In order to maintain its market
`power, Amazon pays “lower wages” in the form of smaller margins to merchants
`and offers merchants unfair terms of sale.
`Amazon’s Predatory Pricing
`i.
`Initially, Amazon exercised its monopsonistic power to the advantage
`15.
`of consumers.
`16. Amazon expressed a “willingness to forego profits to establish
`dominance.”10 Amazon was able to accomplish this through systematic predatory
`pricing – anticompetitive conduct whereby the seller of the good foregoes profit in
`order to destroy competition in the Relevant Market.11 This allowed Amazon to build
`scale, which means that it was able to build a loyal customer base. The customer
`base would eventually fall victim to a massive increase in Amazon’s pricing as a
`result of the market power Amazon built through predatory pricing.
`Jeff Bezos admitted to this strategy leading up to Amazon’s bait-and-
`17.
`switch on consumers:
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`8 Paul Krugman, Amazon’s Monopoly is Not O.K., NEW YORK TIMES (Oct. 20, 2014) at
`https://www.nytimes.com/2014/10/20/opinion/paul-krugman-amazons-monopsony-is-not-
`ok.html.
` “Monopsony” at https://www.britannica.com/topic/monopsony, (last visited June 15, 2021).
`
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`10 Khan; citing Benedict Evans, Amazon’s Profits (Aug. 8, 2013) at http://ben-evans.com
`/benedictevans/2013/8/8/amazons-profits.
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`11 Khan.
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` PHILLIPS LAW FIRM, PLLC
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` 17410 133rd Ave. N.E., Suite 301
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` Woodinville, Washington 98072
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` TEL. 425.482.1111.
`CLASS ACTION COMPLAINT - 5
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`We believe that a fundamental measure of our success will be the
`shareholder value we create over the long term. This value will be a
`direct result of our ability to extend and solidify our current market
`leadership position . . . . We first measure ourselves in terms of the
`metrics most indicative of our market leadership: customer and revenue
`growth, the degree to which our customers continue to purchase from
`us on a repeat basis, and the strength of our brand. We have invested
`and will continue to invest aggressively to expand and leverage our
`customer base, brand, and infrastructure as we move to establish an
`enduring franchise.12
`18. This is further evidenced by Amazon’s increase in profitability while it
`made the switch from predatory pricing to supracompetitive prices.
`13
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`19. Many questioned Amazon’s approach initially. But the approach
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`Amazon was taking was actually time-tested; in fact, this was the exact same strategy
`taken by John D. Rockefeller with respect to the Standard Oil monopsony.14
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`12 Letter to Shareholders, AMAZON.COM, INC. at http://media.corporate-
`ir.net/media_files/irol/97/97664/reports/Shareholderletter97.pdf, (last visited June 15, 2021).
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`13 Khan; citing Amazon’s Profits at http://ben-evans.com/benedictevans/2013/8/8/amazons-
`profits, (last visited June 15, 2021).
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`14 Khan; citing Ida Tarbell, A History of the Standard Oil Company (1905).
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` PHILLIPS LAW FIRM, PLLC
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` 17410 133rd Ave. N.E., Suite 301
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`In sum, “Amazon has achieved its position through deeply cutting
`20.
`prices and investing heavily in growing its operations — both at the expense of
`profits. The fact that Amazon has been willing to forego profits for growth undercuts
`a central premise of contemporary predatory pricing doctrine, which assumes that
`predation is irrational precisely because firms prioritize profits over growth. In this
`way, Amazon’s strategy has enabled it to use predatory pricing tactics without
`triggering the scrutiny of predatory pricing laws.”15
`Amazon’s Unfair Conditions With Merchants
`ii.
`21. Amazon also uses its market power to impose unfair conditions on
`merchants who sell their goods on the Amazon.com platform.
`22. These two conditions are: (1) the MFN that prevents merchants from
`being able to sell their goods on alternative digital e-commerce channels with terms
`and prices that are more favorable than those offered on Amazon, which harms
`consumers by fixing, stabilizing, or increasing the price of those same merchants’
`goods on all platforms including Amazon; and (2) the imposition of high “referral
`fees.” Amazon imposes these unfair terms through Amazon’s Services Business
`Solutions Agreement as well as other policies that are imposed through that
`agreement.16
`23. Consider the following illustration of how these two terms work in
`tandem to harm merchants and consumers.
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`24. These two provisions – the “referral fee” provision and the price parity
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`provision (the MFN) – harm competition and consumers alike.
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`15 Khan.
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`16 Declaration of Ella Irwin, Director of Marketplace Abuse at Amazon (Jul. 13, 2018),
`Kangaroo Mfg., Inc. v. Amazon.com, No. 17-cv-1806SPL (D. Ariz.), Dkt. No. 75, at ¶ 4.
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` PHILLIPS LAW FIRM, PLLC
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`If a merchant opts not to play by Amazon’s rules the penalty for not
`25.
`cooperating with Amazon’s monopolistic scheme is dire and swift.
`26. First, Amazon’s merchants can lose the “buy box” features – which, on
`Amazon’s online marketplace, are the bright “Buy Now” and “Add to Cart” buttons
`that highlight products favored by Amazon’s search algorithm.17 The “buy box”
`features are an essential tool for merchants trying to sell their goods on
`Amazon.com: between 82% to 90% of all sales (or $100 billion worth of goods
`annually) on Amazon are the products that feature the “buy box.”18 The necessity of
`“winning the buy box” has become so pervasive that it has become its own cottage
`industry. An example of the “buy box” is illustrated below:19
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`27. Second, Amazon’s merchants could also have their shipping options
`suspended – which, in turn, would cost the merchants in sales volume.
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`17 Grant Hindsley, Prime Power: How Amazon Squeezes the Businesses Behind Its Store, NEW
`YORK TIMES (Dec. 12, 2019) at https://www.nytimes.com/2019/12/19/technology/amazon-
`sellers.html.
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`18 Aleksandra Tadrzak, How to Win the Amazon Buy Box and Make More Sales, DATAFEED
`WATCH https://www.datafeedwatch.com/blog/amazon-buy-box, (last visited June 18, 2021).
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`19 Id.
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` PHILLIPS LAW FIRM, PLLC
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`28. And third, Amazon’s merchants could be outright terminated or
`suspended from selling on Amazon’s Amazon.com platform – shutting off access to
`over 50% of all e-commerce sales in the Relevant Market. This is a phenomenon
`observed by the United States Congress’ House of Representatives Subcommittee
`on Antitrust: that Amazon’s “market power is at its height in its dealings with
`[merchants].”20
`29. Collectively, Amazon’s conduct harms consumers and throttles
`competition.
`
`INTERSTATE TRADE AND COMMERCE
`30. Amazon’s activities as alleged in this complaint were within the flow
`of, and substantially affected, interstate commerce. Amazon sells goods on its own
`behalf and as a platform for its merchants across, and without regard to, state lines.
`RELEVANT MARKETS
`31. Amazon has monopoly power in the market for online retail platforms
`in the United States and uses this power to restrain prices, resulting in injuries to
`consumers. Amazon also has monopoly power because it is able to dictate the price
`of commodities for sale in the Relevant Market by way of its MFN.
`32. Alternatively, Amazon has monopoly power in the following
`submarkets: (1) home improvement tools; (2) men’s athletic shoes; (3) skin care; (4)
`batteries; (5) golf; (6) cleaning supplies; and (7) kitchen and dining products.
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`33. Amazon’s restraints on competition directly impact each of the markets
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`stated above. Amazon harms consumers by imposing a price floor condition on its
`merchants that results in supracompetitive prices for goods sold on other online retail
`sales platforms. While harming consumers and competition, Amazon itself benefits
`
`
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`20 Investigation of Competition in Digital Markets, Majority Staff Report and Recommendations,
`SUBCOMMITTEE ON ANTITRUST, COMMERCIAL, AND ADMINISTRATIVE LAW OF THE COMMITTEE
`ON THE JUDICIARY (Oct. 6, 2020), at 15 (hereinafter, “House Report”).
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` PHILLIPS LAW FIRM, PLLC
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`from its pricing policies. By avoiding head-to-head competition from lower priced
`products on competing online retail sales platforms, Amazon is able to charge
`supracompetitive prices. Amazon’s price restraints also allow Amazon to inflate the
`prices it can charge for products Amazon itself sells on its platform.
`34. Plaintiff seeks relief on behalf of herself and other purchasers of
`products on Amazon’s platform.
`35. Eliminating Amazon’s anticompetitive pricing policies would not lead
`to any discernible negative effects on either merchants or consumers.
`36. Amazon can point to no legitimate considerations that countervail the
`propriety of the monetary and injunctive relief that Plaintiff seeks.
`CLASS ACTION ALLEGATIONS
`37. Plaintiff brings this action on behalf of herself, and as a class action
`under the Federal Rules of Civil Procedure, Rule 23(a), (b)(2) and (b)(3), seeking
`damages and injunctive relief pursuant to the statutes of the states listed below on
`behalf of the members of the following Class:
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`All persons who on or after May 26, 2017, purchased one or more
`products through Amazon’s platform.
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`38. Excluded from the Class are the Defendant and its officers, directors,
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`management, employees, subsidiaries, or affiliates. Also excluded from the Class
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`are the district judge or magistrate judge to whom this case is assigned, as well as
`those judges’ immediate family members, judicial officers and their personnel, and
`all governmental entities. Further excluded from the Class are individuals who are
`already pursuing antitrust claims based on Amazon’s MFN clause on their individual
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`behalf in arbitration before the American Arbitration Association.
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` PHILLIPS LAW FIRM, PLLC
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` 17410 133rd Ave. N.E., Suite 301
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` Woodinville, Washington 98072
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` TEL. 425.482.1111.
`CLASS ACTION COMPLAINT - 10
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`Case 2:21-cv-00838 Document 1 Filed 06/23/21 Page 13 of 22
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`39. The identity of all Class members are readily identifiable from
`information and records maintained by Defendant.
`40. Numerosity. Plaintiff believes that there are more than 100 million
`members of the Class, geographically dispersed throughout the United States, such
`that joinder of all Class members is impracticable.
`41. Typicality. Plaintiff’s claims are typical of the claims of the other Class
`members. The factual and legal bases of Defendant’s liability are the same and
`resulted in injury to the Plaintiff and all other members of the proposed Class.
`42. Adequate representation. Plaintiff will represent and protect the
`interests of the proposed Class both fairly and adequately. She has retained counsel
`competent and experienced in complex class-action litigation. Plaintiff has no
`interests that are antagonistic to those of the proposed Class, and her interests do not
`conflict with the interests of the proposed Class members she seeks to represent.
`43. Commonality. Questions of law and fact common to the members of
`the Class predominate over questions that may affect only individual Class members
`because Defendant has acted on grounds generally applicable to the Class and
`because Class members share a common injury. Thus, determining damages with
`respect to the Class as a whole is appropriate. The common applicability of the
`relevant facts to claims of Plaintiff and the proposed Class are inherent in
`Defendant’s wrongful conduct, because the overcharge injuries incurred by Plaintiff
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`and each member of the proposed Class arose from the same anticompetitive conduct
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`alleged herein.
`44. There are common questions of law and fact specific to the Class that
`predominate over any questions affecting individual members, including:
`a) Whether Defendant and its merchants unlawfully co