Amazon Prime, Buy Box, and Fulfillment Antitrust Class Action

The complaint for this antitrust class action claims that Amazon.com, Inc. aspires “to dominate every sector of the economy.” It outlines how Amazon Prime, the Buy Box, and Fulfillment by Amazon (FBA) have strong-armed its third-party sellers and raised prices for consumers.

The class for this action is all persons who, while living in the US, bought an item between January 1, 2013 and the present through Amazon’s Buy Box, where the order was fulfilled by Amazon.

Amazon Prime is a membership program that offers unlimited two-day shipping on purchases for no extra cost and one-day shipping at $3.99 per item. The complaint quotes a Congressional Subcommittee as saying that Amazon Prime “has been the linchpin of [the company’s] growth strategy,” helping Amazon gain its control of 65% to 70% of online marketplace sales.

Another factor in Amazon’s control, the complaint alleges, is the Buy Box, a set of two yellow clickable buttons which say “Add to Cart” and “Buy Now.” The complaint alleges that “90% of consumer purchases on Amazon’s website are made through the Buy Box. This is because consumers trust that the product offer placed in front of them on Amazon.com—namely the offer in the Buy Box—is the best deal on the product.” But the complaint says this may not be true.

Third, Amazon offers Fulfillment by Amazon (FBA), which provides warehousing, packing, and shipping for third-party sellers, who make up more than 50% of sales on Amazon. The complaint alleges, “Amazon decided to simply force Sellers to purchase its Fulfillment services.” How did it do that? The complaint claims that “products offered by sellers with a Prime Badge are placed higher in Amazon’s search results and are generally the only products featured in the Buy Box…”

Sellers can’t get the Prime Badge unless they use FBA, the complaint claims, and they need the Prime Badge to get a favorable search result position. The complaint asserts, “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.”

This, the complaint claims, constitutes an unlawful “tying” arrangement, tying the sellers’ outcomes to whether or not they use its FBA services.

This enables Amazon to charge higher fees over other shipping services. One seller wrote to federal lawmakers, “Amazon raised logistics fees by 20% over the [previous] four years until they cost as much as 35% more than competing services.”

Thus sellers who use FBA must raise their product prices to compensate for the fulfillment fees, the complaint says, which in turn means Amazon can charge higher prices for the items it sells. In this way, the price the consumer pays for an item is driven upwards.

Article Type: Lawsuit
Topic: Antitrust
Tags: Antitrust, Requiring Consumer to Pay Higher Prices, Tying Arrangement