Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 1 of 32
`
`The Honorable John H. Chun
`
`UNITED STATES DISTRICT COURT
`WESTERN DISTRICT OF WASHINGTON
`AT SEATTLE
`
`SCOTT
`BROWN,
`CHRISTOPHER
`GRAEBER, LAURA LOES, LETICIA SHAW,
`and DAVID ATWOOD, on behalf of
`themselves and all others similarly situated,
`Plaintiffs,
`
`v.
`AMAZON.COM, INC., a Delaware corporation,
`Defendant.
`
`No. 2:22-cv-00965-JHC
`AMAZON.COM, INC.’S
`MOTION TO DISMISS
`
`NOTE ON MOTION CALENDAR:
`December 16, 2022
`Oral Argument Requested
`
`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC)
`
`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
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`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 2 of 32
`
`TABLE OF CONTENTS
`
`B.
`
`B.
`
`C.
`
`INTRODUCTION ........................................................................................................................ 1
`BACKGROUND .......................................................................................................................... 3
`A.
`Amazon’s Store and Its Dealings with Suppliers ................................................. 3
`B.
`Plaintiffs’ Theory of Harm.................................................................................... 4
`C.
`The Retail Landscape ............................................................................................ 5
`D.
`Plaintiffs ................................................................................................................ 6
`LEGAL STANDARDS ................................................................................................................ 6
`ARGUMENT ................................................................................................................................ 7
`I.
`PLAINTIFFS LACK ANTITRUST STANDING. ........................................................... 7
`A.
`The Alleged Anticompetitive Conduct Occurred in a Market Involving
`Wholesale Suppliers Selling to Retailers, and Plaintiffs Do Not Participate
`in Such a Market. .................................................................................................. 7
`Plaintiffs Are Not Efficient Enforcers of the Antitrust Laws. .............................. 8
`B.
`COURTS ARE RELUCTANT TO INTERFERE WITH NEGOTIATIONS
`BETWEEN A RETAILER AND ITS SUPPLIERS. ...................................................... 11
`A.
`Margin Protection Agreements Reflect Lawful and Procompetitive Price
`Negotiations. ....................................................................................................... 11
`Amazon Can Lawfully Bargain for Lower Costs Because It Is Free to
`Choose the Terms on Which It Deals with Its Suppliers. ................................... 13
`PLAINTIFFS’ SHERMAN ACT CLAIMS FAIL FOR ADDITIONAL,
`INDEPENDENT REASONS.......................................................................................... 15
`A.
`Plaintiffs Fail to State a Section 1 Claim under the Quick-Look
`Framework. ......................................................................................................... 15
`Plaintiffs’ Sections 1 and 2 Claims Fail Because the Complaint Does Not
`Plausibly Allege Anticompetitive Effects. .......................................................... 17
`Plaintiffs Fail to State Section 1 and 2 Claims Because They Do Not
`Allege Cognizable Relevant Markets. ................................................................ 20
`PLAINTIFFS’ CLAIMS UNDER CALIFORNIA AND MARYLAND LAW
`FAIL FOR THE SAME REASONS PLAINTIFFS’ FEDERAL CLAIMS FAIL. ........ 23
`CONCLUSION ........................................................................................................................... 24
`
`II.
`
`III.
`
`IV.
`
`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - i
`
`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
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`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 3 of 32
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`49er Chevrolet, Inc. v. Gen. Motors Corp.,
`803 F.2d 1463 (9th Cir. 1986) .................................................................................................14
`
`AAA Liquors, Inc. v. Joseph E. Seagram & Sons, Inc.,
`705 F.2d 1203 (10th Cir. 1982) .........................................................................................12, 16
`
`AFMS LLC v. United Parcel Serv. Co.,
`105 F. Supp. 3d 1061 (C.D. Cal. 2015) ...................................................................................16
`
`Am. Ad Mgmt, Inc. v. Gen. Tel. Co. of California,
`90 F.3d 1051 (9th Cir. 1999) .....................................................................................................8
`
`Am. Ad Mgmt., Inc. v. GTE Corp.,
`92 F.3d 781 (9th Cir. 1996) .......................................................................................................7
`
`In re Amazon.com, Inc. eBook Antitrust Litigation,
`2022 WL 4581903 (S.D.N.Y. 2022) ..................................................................................17, 19
`
`In re Am. Express Anti-Steering Rules Antitrust Litig.,
`19 F.4th 127 (2d Cir. 2021) .................................................................................................9, 10
`
`Ohio v. Am. Express,
`138 S. Ct. 2274 (2018) .......................................................................................................20, 23
`
`Analogix Semiconductor Inc. v. Silicon Image, Inc.,
`2008 WL 8096149 (N.D. Cal. 2008) .......................................................................................20
`
`Andrx Pharms. v. Biovail Corp. Int’l,
`256 F.3d 799 (D.C. Cir. 2001) .................................................................................................10
`
`United States v. Apple,
`791 F.3d 290 (2d Cir. 2015)...............................................................................................16, 17
`
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ...................................................................................................................6
`
`Ass’n of Wash. Pub. Hosp. Dists. v. Philip Morris Inc.,
`241 F.3d 696 (9th Cir. 2001) .....................................................................................................8
`
`Associated General Contractors of California, Inc. v. California State Council of
`Carpenters,
`459 U.S. 519 (1983) ...............................................................................................................1, 8
`
`1 2 3 4 5 6 7 8 9
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`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - ii
`
`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
`206.622.3150 main · 206.757.7700 fax
`
`

`

`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 4 of 32
`
`Atl. Richfield Co. v. USA Petrol. Co.,
`495 U.S. 328 (1990) .................................................................................................................11
`
`Austin v. Blue Cross & Blue Shield of Ala.,
`903 F.2d 1385 (11th Cir. 1990) ...............................................................................................13
`
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) ...................................................................................................................6
`
`Big Bear Lodging Ass’n v. Snow Summit, Inc.,
`182 F.3d 1096 (9th Cir. 1999) .................................................................................................21
`
`Blue Shield of Virginia v. McCready,
`457 U.S. 465 (1982) .................................................................................................................10
`
`Brantley v. NBC Universal, Inc.,
`675 F.3d 1192 (9th Cir. 2012) .................................................................................................20
`
`Brillhart v. Mut. Med. Ins., Inc.,
`768 F.2d 196 (7th Cir. 1985) ...................................................................................................13
`
`Bubar v. Ampco Foods, Inc.,
`752 F.2d 445 (9th Cir. 1985) .....................................................................................................7
`
`Butera v. Sun Oil Co.,
`496 F.2d 434 (1st Cir. 1974) ....................................................................................................13
`
`Cable Line, Inc. v. Comcast Cable Communications of Pennsylvania, Inc.,
`2017 WL 4685359 (M.D. Pa. 2017) ............................................................................21, 22, 23
`
`Campfield v. State Farm Mut. Auto. Ins. Co.,
`532 F.3d 1111 (10th Cir. 2008) .........................................................................................20, 22
`
`City of Oakland v. Oakland Raiders,
`20 F.4th 441 (9th Cir. 2021) ............................................................................................7, 8, 10
`
`In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litig.,
`691 F.2d 1335 (9th Cir. 1982) .................................................................................................11
`
`Coronavirus Rep. v. Apple, Inc.,
`2021 WL 5936910 (N.D. Cal. 2021) .......................................................................................23
`
`Dickson v. Microsoft Corp.,
`309 F.3d 193 (4th Cir. 2002) ...................................................................................................18
`
`In re EpiPen Direct Purchaser Litigation,
`2022 WL 1017770 (D. Minn. 2022) ........................................................................................19
`
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`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - iii
`
`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
`206.622.3150 main · 206.757.7700 fax
`
`

`

`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 5 of 32
`
`Feitelson v. Google Inc.,
`80 F. Supp. 3d 1019 (S.D. Cal. 2015) ..................................................................................8, 20
`
`Frame-Wilson v. Amazon.com, Inc.,
`2022 WL 741878 (W.D. Wash. 2022) .....................................................................................17
`
`Golden Gate Pharm. Servs., Inc. v. Pfizer, Inc.,
`433 F. App’x 598 (9th Cir. 2011) ............................................................................................22
`
`United States v. Grinnell Corp.,
`384 U.S. 563 (1966) ...................................................................................................................7
`
`Cal. ex rel. Harris v. Safeway, Inc.,
`651 F.3d 1118 (9th Cir. 2011) .............................................................................................2, 16
`
`Hicks v. PGA Tour, Inc.,
`897 F.3d 1109 (9th Cir. 2018) .................................................................................................20
`
`Illinois Brick Co. v. Illinois,
`431 U.S. 720 (1977) .................................................................................................................10
`
`Kartell v. Blue Shield of Mass., Inc.,
`749 F.2d 922 (1st Cir. 1984) ....................................................................................................13
`
`Kloth v. Microsoft Corp.,
`444 F.3d 312 (4th Cir. 2006) ...................................................................................................11
`
`Kolling v. Dow Jones & Co.,
`137 Cal. App. 3d 709 (Ct. App. 1982) .....................................................................................23
`
`Kunert v. Mission Fin. Servs. Corp.,
`110 Cal. App. 4th 242 (2003) ..................................................................................................24
`
`Leegin Creative Leather Prods. v. PSKS, Inc.,
`551 U.S. 877 (2007) .................................................................................................................14
`
`Lewis Service Center, Inc. v. Mack Truck,
`714 F.2d 842 (8th Cir. 1983) .............................................................................................11, 12
`
`Lifewatch Servs. Inc. v. Highmark Inc.,
`902 F.3d 323 (3d Cir. 2018).....................................................................................................20
`
`Lorenzo v. Qualcomm Inc.,
`603 F. Supp. 2d 1291 (S.D. Cal. 2009) ......................................................................................8
`
`Lucas v. Bechtel Corp.,
`800 F.2d 839 (9th Cir. 1986) ...................................................................................................10
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`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - iv
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`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
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`
`

`

`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 6 of 32
`
`Mailand v. Burckle,
`20 Cal. 3d 367 (1978) ..............................................................................................................24
`
`Monahan’s Marine, Inc. v. Bos. Whaler, Inc.,
`866 F.2d 525 (1st Cir. 1989) ....................................................................................................15
`
`N.M. Oncology v. Presbyterian Healthcare Servs.,
`418 F. Supp. 3d 826 (D.N.M. 2019) ........................................................................................13
`
`Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc.,
`555 U.S. 438 (2009) .......................................................................................................2, 13, 15
`
`PLS.Com, LLC v. Nat’l Ass’n of Realtors,
`32 F.4th 824 (9th Cir. 2022) ....................................................................................................18
`
`Pool Water Prods. v. Olin Corp.,
`258 F.3d 1024 (9th Cir. 2001) ...................................................................................................7
`
`Pro Music Rights LLC v. Apple, Inc.,
`2020 WL 7406062 (D. Conn. 2020) ........................................................................................22
`
`FTC v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) ........................................................................................... passim
`
`Randy’s Ring & Pinion Serv., Inc. v. Eaton Corp.,
`2009 WL 10727790 (W.D. Wash. 2009) .................................................................................20
`
`Rebel Oil Co. v. Atl. Richfield Co.,
`51 F.3d 1421 (9th Cir. 1995) ...................................................................................................18
`
`Schwab Short-Term Bond Mkt. Fund v. Lloyds Banking Grp. PLC,
`22 F.4th 103 (2d Cir. 2021) .....................................................................................................10
`
`Seafarers Welfare Plan v. Philip Morris,
`27 F. Supp. 2d 623 (D. Md. 1998) ...........................................................................................23
`
`SmileCare Dental Grp. v. Delta Dental Plan of Cal., Inc.,
`88 F.3d 780 (9th Cir. 1996) .......................................................................................................6
`
`Song Fi Inc. v. Google Inc.,
`2016 WL 1298999 (N.D. Cal. 2016) .......................................................................................23
`
`Tanaka v. Univ. S. Calif.,
`252 F.3d 1059 (9th Cir. 2001) .................................................................................................21
`
`Todd v. Exxon Corp.,
`275 F.3d 191 (2d Cir. 2001).....................................................................................................21
`
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`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - v
`
`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
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`

`

`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 7 of 32
`
`Universal Grading Serv. v. eBay, Inc.,
`2012 WL 70644 (N.D. Cal. 2012) ...........................................................................................22
`
`US Airways, Inc. v. Sabre Holdings Corp.,
`938 F.3d 43 (2d Cir. 2019).......................................................................................................23
`
`Verizon Commc'ns Inc. v. Law Offs. of Curtis V. Trinko, LLP,
`540 U.S. 398, 417, (2004) ..........................................................................................................9
`
`Walker Process Equip, Inc. v. Food Mach. & Chem. Corp.,
`382 U.S. 172 (1965) .................................................................................................................20
`
`Walker v. USAA Inc. Co.,
`474 F. Supp. 2d 1168 (C.D. Cal. 2007) .............................................................................14, 24
`
`William O. Gilley Enterprises, Inc. v. Atlantic Richfield Co.,
`2006 WL 8437393 (S.D. Cal. 2006) ........................................................................................19
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`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - vi
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`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
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`
`

`

`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 8 of 32
`
`INTRODUCTION
`
`In the intensely competitive retail industry, consumers compare prices across many
`options to find the best deal. One of Amazon’s core business objectives in serving its customers
`is to have a reputation for low prices, and Amazon constantly works to offer its customers low
`prices to maintain that reputation. Like all retailers, Amazon negotiates with its suppliers to
`lower Amazon’s wholesale costs so that Amazon may set competitive retail prices. One way
`Amazon does this is to negotiate Margin Agreements with some of its suppliers that determine
`the amounts Amazon pays those suppliers when Amazon lowers its retail prices to consumers.
`Plaintiffs, consumers who shop in Amazon’s store, seek to turn antitrust law on its head by
`bringing this case to challenge the Margin Agreements. Amazon lowering retail prices—the
`event that triggers the Margin Agreements—not only benefits Plaintiffs, it is an outcome that
`antitrust law encourages, not condemns. Even taking the Complaint’s allegations as true, there
`are multiple independent reasons why the Court should dismiss Plaintiffs’ claims in full.
`First, Plaintiffs lack antitrust standing because they (1) have not suffered an “antitrust
`injury” in the relevant market; and (2) are not “efficient enforcers” of the antitrust laws. The
`Complaint challenges conduct related to Amazon’s purchase of goods from suppliers on a
`wholesale basis for eventual sale to consumers. That conduct occurs entirely outside any market
`in which Plaintiffs, as consumers, participate. Where, as here, Plaintiffs’ alleged injuries are
`“experienced in another market,” they “do not suffer antitrust injury.” FTC v. Qualcomm Inc.,
`969 F.3d 974, 992 (9th Cir. 2020).1 Nor are Plaintiffs efficient enforcers of the antitrust laws
`because their alleged injury is not proximately caused by the alleged anticompetitive conduct, as
`required by Associated General Contractors of California, Inc. v. California State Council of
`Carpenters (“AGC”), 459 U.S. 519, 535−36 (1983). To the contrary, as Plaintiffs admit in their
`allegations, the alleged antitrust injury occurs only at the end of a multi-step causal chain
`
`1 With respect to quoted material, unless otherwise indicated, all brackets, ellipses, footnote call numbers, internal
`quotations, and citations have been omitted for readability. All emphasis is added unless otherwise indicated.
`Davis Wright Tremaine LLP
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`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - 1
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`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 9 of 32
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`involving multiple intervening and independent acts by suppliers and other retailers, rather than
`at the first step of the chain as AGC requires.
`Second, Plaintiffs challenge conduct that cannot give rise to antitrust liability. Plaintiffs
`allege that the Margin Agreements are anticompetitive because Amazon and its suppliers are
`agreeing to lower wholesale prices in response to lower consumer prices that reduce Amazon’s
`margins. Whether accomplished by pre-established agreements or subsequent wholesale price
`negotiations, antitrust law does not interfere with price negotiations between a supplier and
`retailer, including to protect the retailer’s margins. Antitrust law encourages retailers like
`Amazon to lower consumer prices by lowering its costs. Pac. Bell Tel. Co. v. linkLine
`Commc’ns, Inc., 555 U.S. 438, 448 (2009).
`Third, even assuming there is an antitrust claim which Plaintiffs have standing to bring,
`Plaintiffs fail to state a Section 1 claim under the “quick-look” framework. The quick-look
`framework applies only where “an observer with even a rudimentary understanding of
`economics” can confidently conclude that the agreements are plainly anticompetitive. Cal. ex
`rel. Harris v. Safeway, Inc., 651 F.3d 1118, 1134 (9th Cir. 2011). “Quick look” analysis is
`foreclosed here because courts have declined to interfere with above-cost wholesale price
`negotiations and have upheld as procompetitive agreements whereby wholesalers provide rebates
`to retailers to allow for price cuts to consumers—precisely what Plaintiffs allege the Margin
`Agreements allow Amazon to do. Plaintiffs’ sole basis for requesting “quick-look” analysis is its
`allegation that the Margin Agreements are “vertical price fixing” agreements, but the Margin
`Agreements are not price-fixing because, as the Complaint alleges, Amazon independently sets
`the retail prices for the products it sells. Compl. ¶ 35.
`Fourth, the Complaint lacks plausible allegations of anticompetitive effects. Plaintiffs’
`theory of anticompetitive effects is that Amazon’s suppliers subject to Margin Agreements have
`the power to charge other retailers—even major ones—higher wholesale prices or the power to
`pressure those retailers to raise retail prices to consumers, in order to avoid triggering payments
`under the Margin Agreements. Plaintiffs do not plausibly allege that any of Amazon’s suppliers
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`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 10 of 32
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`has the market power to control how Amazon’s retail competitors (such as Walmart or Target)
`price their products, or that these retail competitors would raise prices (and thereby risk losing
`sales to competitors) just because a supplier asks. Nor do Plaintiffs plausibly allege how
`Amazon’s suppliers are able to impose and maintain higher market-wide prices across all
`retailers. The Complaint also does not allege that any specific product was available at a
`supracompetitive price in Amazon’s store as a result of the Margin Agreements.
`Fifth, Plaintiffs fail to allege a relevant antitrust market, an essential element of their
`claims. Amazon enters into Margin Agreements in a market in which retailers and suppliers
`negotiate the price of wholesale goods. But Plaintiffs make no allegations about any such
`market. Instead, the Complaint focuses on the alleged effect of the Margin Agreements in an
`entirely different market—the purported Online Retail Marketplace market—in which
`consumers purchase goods from retailers. Even that market is not plausibly alleged. For
`antitrust purposes, a relevant product market must be defined by products that are reasonably
`interchangeable substitutes. Plaintiffs’ proposed market excludes identical products available in
`single-seller online and brick-and-mortar stores, and aggregates products of highly differentiated
`uses (like shoes, batteries, and motor oil) that are not reasonably interchangeable.
`Finally, the state law antitrust claims fail for the same reasons the federal claims fail.
`
`BACKGROUND
`Amazon’s Store and Its Dealings with Suppliers
`
`A.
`
`Amazon operates a retail store in which it offers millions of products directly to
`consumers. Compl. ¶¶ 15, 91. Like other retailers, Amazon purchases goods at wholesale and in
`turn sells those goods to consumers. The Complaint challenges agreements that Amazon enters
`into with a subset of its suppliers, called minimum margin agreements (“Margin Agreements”).
`Margin Agreements address the amounts Amazon pays those suppliers for products that Amazon
`sells at retail and are triggered when Amazon “lowers its retail price to match the price of a
`competitor.” Compl. ¶ 35. Amazon pays the supplier a price for goods it will sell, but some of
`that may be refunded by the supplier if Amazon does not earn an agreed margin for that product.
`
`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - 3
`
`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
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`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 11 of 32
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`Id. ¶¶ 3-4. The agreements are individually negotiated by Amazon and each supplier, with the
`negotiations including the prices (i.e., costs to Amazon) and other terms of dealing between
`Amazon and its suppliers. Id. ¶¶ 3-4, 6 nn.8-9, 7 nn.10-11, 8 n.12, 12 n.22.
`Negotiations and agreements relating to wholesale prices and margins are common
`throughout retail. The Complaint cites sources explaining that retailers like Walmart, CVS,
`Sam’s Club, and Walgreens use margin guarantees in their dealings with wholesalers, Compl. ¶ 3
`n.6,2 and that seeking such guarantees “is nothing new with large retailers,” id. ¶ 12 n.22.3
`Retailers negotiate lower wholesale prices in order to increase their margins. Id. ¶ 3 n.6.4
`B.
`Plaintiffs’ Theory of Harm
`Plaintiffs attempt to thwart established antitrust law by alleging that Amazon lowering
`prices for products to consumers in its store triggers a complex multi-step chain of events that
`somehow ultimately results in “higher consumer prices.” Compl. ¶ 6. According to the
`Complaint, in the first step of this chain, Amazon “lowers its retail price to match the price of a
`competitor.” Id. ¶ 35. Because that “price cut” reduces Amazon’s margin, id. ¶ 9, Amazon
`allegedly then seeks a payment from its supplier, pursuant to a Margin Agreement, so Amazon
`can maintain its margin. Id. ¶¶ 6, 8.
`Plaintiffs allege that suppliers who make margin payments do one of two things to
`prevent making additional payments under the Margin Agreements: (a) raise wholesale prices to
`Amazon’s retail competitors, or (b) “otherwise restrict” those competitors from offering lower
`retail prices—although the Complaint does not say how. Id. ¶ 39. Through these actions,
`suppliers allegedly “adopt a de facto minimum retail price (or floor price) for their products
`market-wide.” Id. ¶¶ 5, 39, 121, 151. Only then, according to the Complaint, do “higher
`
`2 Citing Boyd Evert, The squeeze continues for retail suppliers, Talk Business & Politics,
`https://talkbusiness.net/2017/10/the-squeeze-continues-for-retail-suppliers/.
`3 Citing Carina McLeod, Amazon Vendor Contract Negotiations: What you Need to Know, eComEngine,
`https://www.ecomengine.com/blog/vendor-contract-negotiations.
`4 Citing Boyd Evert, The squeeze continues for retail suppliers, Talk Business & Politics,
`https://talkbusiness.net/2017/10/the-squeeze-continues-for-retail-suppliers/ (“Earlier this year, select suppliers
`attended a meeting where Walmart reportedly conveyed an expectation of a 15% cut in their cost of goods, while
`maintaining margins.”).
`
`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - 4
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`Davis Wright Tremaine LLP
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`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 12 of 32
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`consumer prices” result for products purchased “market-wide” and by Plaintiffs in Amazon’s
`store. Id. ¶¶ 5, 6, 133. A chart in the Complaint, id. ¶ 6, demonstrates that the first step of the
`causal chain—reduced prices by other retailers—benefits Plaintiffs, and that Plaintiffs’ alleged
`injury does not occur until the sixth step of the causal chain, involving intervening and
`independent pricing decisions by suppliers and retailers:
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`Step 1
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`Step 5
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` Step 2
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` Step 3
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`Step 4
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`Alleged
`Harm
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`C.
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`The Retail Landscape
`
`The Complaint describes a dynamic and competitive retail landscape, within Amazon’s
`store and across a diverse set of online and physical retailers and marketplaces. In Amazon’s
`store alone, the Complaint describes how Amazon features only the most competitive price for a
`product—and how the featured offer is dynamic, changing frequently. Compl. ¶¶ 47-48.
`The Complaint acknowledges that consumers have multiple options outside of Amazon’s
`store: there are large retailers like Walmart, Target, and Costco, which offer millions of products
`in physical stores and online—just as Amazon does. Compl. ¶¶ 12, 14. Walmart and Target sell
`direct to consumers as first-party retailers and also open their online stores to third-party sellers.
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`AMAZON’S MOTION TO DISMISS (2:22-cv-00965-JHC) - 5
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`Davis Wright Tremaine LLP
`LAW OFFICES
`920 Fifth Avenue, Suite 3300
`Seattle, WA 98104-1610
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`Case 2:22-cv-00965-JHC Document 18 Filed 09/30/22 Page 13 of 32
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`Id. ¶¶ 12, 14. There are also other online marketplaces like eBay, where sellers offer a
`broadbased range of goods for sale to consumers just as they do in Amazon’s store. Id. ¶ 13,
`¶ 16 n.31.5 And there are “single-merchant online stores,” where retailers offer their products
`direct to consumers. Id. ¶¶ 60(b), 69. Consumers can also discover and purchase products
`through social media, price comparator websites, and search engines like Google shopping. Id.
`¶¶ 75-78.
`Plaintiffs
`D.
`Plaintiffs are five consumers from California and Maryland who shop in Amazon’s store.
`Compl. ¶¶ 29-33. Each alleges that they have purchased goods “directly from Amazon as a
`first-party seller.” Id. They identify seven brands of such products—Adidas, Bosch, Carhartt,
`Hanes, D’Addario, Oral-B, and Tide—but do not identify what product was purchased, or even
`whether Amazon purchased each product from a supplier subject to a Margin Agreement
`applicable to that product. Id.6 Plaintiffs allege they “were forced to pay more” for those
`products in Amazon’s store than they would have if Amazon had not entered into Margin
`Agreements with its suppliers. Id. ¶ 117.
`
`LEGAL STANDARDS
`
`To survive a Rule 12(b)(6) motion, a complaint must allege “enough facts to state a claim
`to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007).
`Determining whether a claim is plausible is “a context-specific task that requires the reviewing
`court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662,
`679 (2009). A plaintiff cannot defeat a motion to dismiss based on a complaint’s “conclusory
`language regarding the elimination of competition and improper purpose.” SmileCare Dental
`Grp. v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 783 (9th Cir. 1996).
`
`5 According to this source, 80% of third-party sellers in Amazon’s store also sell in these different marketplaces.
`Recipeexpress, 15 Amazon Statistics You Need to Know, https://www.repricerexpress.com/amazon-statistics/ (cited
`in Compl. ¶ 16 n.31).
`6 Plaintiff Loes does not identify the brand of any product she purchased from Amazon. Id. ¶ 31.
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