Amazon Hit with Two Antitrust Class Actions Days After Axing Mandatory Arbitration Policy

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Amazon has been hit with two proposed antitrust class actions in Washington just days after reversing course on its long-standing mandatory arbitration policy, which required that all disputes with the retail behemoth be handled outside of court. 

The similarly worded lawsuits, filed July 26 and July 28 in the Western District of Washington, allege Amazon’s “monopoly-level” power in the retail sector has given the company an unfair edge in the logistics market, forced sellers to pay supra-competitive prices for its fulfillment services, and increased prices for consumers who shop on Amazon.com. The lawsuits allege Amazon’s antitrust violations led to customers being overcharged by roughly $5 billion in 2020 alone and “billions of dollars more over the preceding years,” due in part to the 30-percent seller fees the company imposes on merchants who use its platform. 

Highlighted in the cases is what’s alleged to be a scheme whereby Amazon effectively forces sellers to use its fulfillment services, allowing them access to the “Buy Box” on the platform through which “90% of consumer purchases on Amazon.com are made”: 

“Thus, if two Sellers—one of whom pays for Amazon’s Fulfillment services while the other doesn’t—offer the same product on Amazon.com, the Seller who pays Amazon for Fulfillment services will ‘win’ the Buy Box and make the sale, even if the competing Seller offers a lower total price and faster, more reliable shipping.” 

The suit clarifies that by forcing sellers into its fulfillment services, Amazon is engaging an “unlawful tying arrangement” that violates antitrust laws (emphasis ours): 

“Placement in the Buy Box is the ‘tying’ product or service and Sellers are the ‘buyers.’ Access to the Buy Box is completely controlled by Amazon, and Amazon’s algorithm assures that only products with the Prime Badge are offered through the Buy Box. Fulfillment by Amazon is the ‘tied’ product or service, which Sellers must purchase to obtain access to the Buy Box. In short, ‘Amazon is tying the outcomes it generates for sellers using its retail platform to whether they also use its delivery business.’” 

Given sellers are charged “supra-competitive” prices for Amazon’s fulfillment services, those extra costs are then passed on to regular consumers, the suits say. 

With regard to recent updates to its “conditions of use,” which must be agreed to in order to use any of Amazon’s services, the company highlighted in an email to customers last week that changes were being made to “how disputes are resolved between you and Amazon.” Going forward, disputes with Amazon will be handled not through an out-of-court arbitration process, but in state or federal courts in King County, Washington, where the company is headquartered. By agreeing to the revised conditions of use, users consent to “exclusive jurisdiction and venue in these courts,” while both Amazon and consumers “waive any right to a jury trial.” 

Though no firm reason was given by Amazon for the reversal on its arbitration clause, Law360 reported on July 23 that the company currently faces upward of 74,000 individual arbitration claims submitted to the American Arbitration Association on behalf of consumers who alleged their communications were improperly collected through Alexa-enabled smartspeakers. Law360 noted individual arbitration could be expensive for even Amazon given private arbitrators need to be paid for each individual dispute. 

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