Class Action: Apple, Amazon Agreed to Kick iPhone, iPad Resellers Off Marketplace, Jacking Up Prices for Consumers

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Apple and Amazon face a proposed class action that alleges the retail giants have unlawfully worked together to eliminate or at least severely reduce the “competitive threat” posed by third-party merchants, “profit[ing] handsomely” while spiking the price of iPhones and iPads sold on the Amazon Marketplace. 

The 45-page lawsuit alleges the “horizontal agreement” between Amazon, the world’s largest online seller of electronics, and Apple, the world’s largest tech company, amounts to “naked restraint” of competition, in violation of the federal Sherman Antitrust Act. 

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According to the suit, Apple and Amazon, two horizontal competitors seemingly unable to overcome the challenges posed by hundreds of Apple resellers on the Amazon Marketplace, decided in 2018 to “address them collectively” through an agreement that wiped out nearly all Apple resellers on Amazon’s Marketplace. In exchange for eliminating the resellers responsible for driving down Apple product prices, Apple agreed to provide Amazon with consistent supplies at a discount of up to 10 percent, contingent on its ability to keep the number of resellers on its marketplace low, the lawsuit alleges. 

The filing expands that this case is “not about Apple independently selecting its trading partners or Amazon independently enforcing its own platform rules,” but about two horizontal competitors who’ve allegedly agreed to erase “the competitive threat posed by hundreds of other horizontal competitors.” 

“Erecting barriers to entry to keep competitors out and raising prices in the wake of their elimination is precisely the kind of conduct that Congress enacted antitrust laws to prevent and cannot be justified on procompetitive grounds,” the lawsuit scathes. “This collusive agreement is what economists call a ‘group boycott’ or ‘concerted refusal to deal.’” 

The foregoing “unlawful boycott agreement,” called the Global Tenets Agreement, effective on January 1, 2019, placed a limit on the number of Apple resellers on the Amazon Marketplace, the suit says. In exchange for keeping out hundreds of third-party merchants who sell Apple products, Apple guaranteed Amazon “a steady supply of Apple goods” at “discounted wholesale prices,” the case claims. 

“Pursuant to the Unlawful Boycott Agreement, Apple authorized just seven Apple resellers to sell on Amazon Marketplace in the United States,” the complaint says. “The remaining resellers (at least 600) had their Apple products removed from the platform by Amazon.”

The alleged agreement between Amazon and Apple transformed the former’s “near-zero” share of iPhone and iPad sales on the Amazon Marketplace to “its current dominant position.” A chart included in the complaint purports to show that just before the beginning of 2019, Amazon far and away began to dominate sales of iPhones and iPads on its Marketplace:

The case summarizes that the “win for Amazon was a loss to consumers” as price competition deteriorated almost immediately in the wake of virtually every Apple reseller being eliminated from the Amazon Marketplace.

“The steep discounts on Apple products that consumers once enjoyed on Amazon Marketplace eroded, with prices rising steadily,” the suit states, relaying that the connection between the drop in resellers and increase in prices shows up most clearly in pricing data for Apple iPhones and iPads:

While consumers’ wallets took a hit from the alleged agreement between Amazon and Apple, third-party merchants were also harmed in that one of the only viable channels for reaching customers, Amazon’s Marketplace, was taken away from them, the lawsuit contends. Many merchants kept off Marketplace “had nowhere to turn and could not and cannot compete in the market,” the case says. 

The lawsuit looks to cover all persons and entities who, as United States residents from January 1, 2019 through the date notice is sent to the proposed class, purchased any new iPhone or iPad from the Buy Box on Amazon.com. 

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