Amazon Tying Scheme Antitrust Lawsuit
Court: United States District Court, Western District of Washington
Hogan v. Amazon.com Inc., Case No.: 2:21-cv-996-RSM
Wexler Boley & Elgersma and co-counsel brought this antitrust class action against Amazon.com, Inc., alleging that the company violated the antitrust laws by using its monopoly‑level power to force third‑party sellers to purchase Amazon’s expensive Fulfillment (logistics) services in order to gain favorable placement on Amazon’s website. This scheme led to third-party sellers—and ultimately Amazon itself—to raise prices, thereby harming hundreds of millions of consumers.
The lawsuit alleges that Amazon launched its Fulfillment by Amazon (FBA) service in 2006 with the goal of dominating the highly profitable shipping and logistics industry. To rapidly gain customers and expand in a highly competitive industry, Amazon used its immense power over third-party sellers to force them to purchase its Fulfillment services. Amazon accomplished this by requiring that third‑party sellers buy its Fulfillment to obtain access to a Prime Badge. The Prime Badge is extremely important to third‑party sellers on Amazon’s website because sellers who do not have a Prime Badge are placed lower in Amazon’s search results and almost never appear in the Buy Box, through which 90% of Amazon.com sales are made.
Plaintiffs allege that by forcing sellers to purchase its Fulfillment service, Amazon is violating antitrust laws through an unlawful “tying arrangement”—namely, tying a third-party seller’s access to the Buy Box to the seller’s purchase of its Fulfillment services.
The lawsuit further alleges that Amazon’s anticompetitive conduct directly leads to higher prices for Amazon.com shoppers through several mechanisms. First, by giving Buy Box placement to products sold by Amazon and sellers who utilize the company’s Fulfillment services, consumers pay a higher price even when the identical product is offered at a lower cost with faster shipping from sellers who control their own shipping method. Second, because an offer from a seller who pays for Fulfillment by Amazon “wins” the Buy Box over an offer from a non-FBA Seller who offers the identical product for a lower price and with faster delivery, price competition among third-party sellers on Amazon.com is greatly reduced. Third, Amazon charges more for its Fulfillment services than its competitors in the logistics industry, and third-party sellers on its platform increase prices to meet their margins. Finally, since many items on Amazon’s website are sold by both Amazon and third-party sellers, the higher prices charged by sellers who use Amazon’s Fulfillment services enable Amazon to price its products higher than it otherwise would have.
The complaint alleges that, by a conservative estimate, Amazon’s unlawful tying scheme has led to Amazon shoppers being overcharged by approximately $5 billion in 2020 alone.
To view a copy of the complaint, click here.