Amazon is facing new competition questions over its relationships with third-party merchants and wholesalers. The Wall Street Journal reports that California is suing the e-commerce giant over practices the state says inflate prices, stifle competition and violate antitrust laws. 

The case is the biggest legal challenge so far for Amazon over how it treats outside companies, following a suit in the District of Columbia as well as investigations by federal regulators, the European Union and a congressional committee. 

Read more: Amazon's Third-Party Sellers Need a Hand. Congress Can Help.

California alleges that Amazon requires sellers to sign agreements that penalize them for offering their products at cheaper prices on competing sites such as Walmart or Target. Those who don’t comply may lose prime search positions, the suit says, and may even be suspended or removed. 

California says the company’s dominance in online retail leaves third-party sellers and wholesalers with little choice but to go along with tough terms on competition.