On April 6, 2015, the Department of Justice Antitrust Division announced that David Topkins, a former executive of an e-commerce seller of wall décor, had pled guilty to a one-count felony charge for conspiring to fix the prices of certain posters sold in the United States through Amazon Marketplace in the latter half of 2013. This represents a new front for the Antitrust Division’s criminal enforcement of price fixing.
Mr. Topkins and his co-conspirators were third-party sellers on Amazon Marketplace who utilized commercially available algorithm-based pricing software, which operates by using competitor pricing information in accordance with rules the seller sets. The charges against Mr. Topkins state that he and his co-conspirators wrote computer code so that the software would coordinate their respective prices in conformity with the anticompetitive agreement.
Assistant Attorney General Bill Baer of the Department of Justice’s Antitrust Division has billed the announcement as the Division’s first criminal prosecution against a conspiracy specifically targeting e-commerce, stating, “We will not tolerate anticompetitive conduct, whether it occurs in a smoke-filled room or over the Internet using complex pricing algorithms. American consumers have the right to a free and fair marketplace online, as well as in brick and mortar businesses.”
While the Antitrust Division has been giving a great deal of attention to the internet and e-commerce in recent years, until today’s announcement the Division’s activities have been limited to civil enforcement. With today’s announcement, the Division has raised the stakes – criminal violations can lead to corporate fines of $100 million or more and to jail time for individuals up to 10 years. A company that utilizes algorithm-based pricing software needs to take particular care that its rules are decided independently of the rules of other competitors, especially if that company is involved in an online marketplace that utilizes an auction model like Amazon Marketplace.