Amazon Investors Amazon Execs Hid Antitrust Troubles

 

Shareholders say Bezos and Execs Caused Them “Massive” Losses

Two Amazon Inc. investors have filed a shareholder derivative lawsuit against Jeff Bezos and other senior company leaders, alleging they exposed the company to a “massive financial hit” through antitrust violations and unnecessarily rapid expansion that had to be scaled back. 

The lawsuit targets 20 members of Amazon’s board and management, which includes past and present Directors and Officers. It accuses them of lying about the company’s practices in two major areas: its private-label business selling products alongside third-party merchants, and the ultra-fast delivery that’s a key part of the company’s identity. 

While Bezos and the others were trumpeting the success of Amazon’s private-label brands, the suit alleges, they were secretly exploiting their monopoly power over third-party sellers on Amazon’s Marketplace to engage in anticompetitive data practices toward these sellers, using their non-public data to compete with them and giving their own in-house brands preference over the third-party sellers. While publicly Amazon characterizes its sellers as “partners,” the plaintiffs say that behind closed doors company executives refer to them as “internal competitors.”
 

Numerous cases have emerged of Amazon poaching the products of small businesses and driving them out of business, exploiting third-party merchants’ non-public data for their own gain, the complaint states. 

The shareholders recounted information shared during congressional hearings. During an investigation into the state of competition online, led by the House Subcommittee on Antitrust, Commercial and Administrative Law, Chair David N. Cicilline’s (D-RI) told this story: “[A former third-party merchant] discovered and started selling a unique item that had never been a top seller for the brand. They were making about $60,000 a year on just this one item. One day, they woke up and found that Amazon had started listing the exact same product, causing their sales to go to zero overnight. Amazon had undercut their price, setting it below what the manufacturer would generally allow it to be sold so that, even if they wanted to, they couldn’t match the price.” 

These anticompetitive practices together with Amazon’s market dominance have exposed the retail tech titan to an increasing amount of scrutiny by regulators, the shareholders note. While engaging in these alleged anticompetitive practices, Bezos and others were rigging Amazon’s search algorithms to favor its own products — a tactic that’s also the focus of investigations and litigation — while pushing to expand fulfillment and delivery services at an unnecessarily fast pace that stretched company resources, amounting to a waste of corporate assets, the investors allege. 

As news was emerging of Amazon’s anticompetitive business practices and fulfillment problems, its stock prices dropped by as much as 3.66% in July 2020, according to the complaint. 

The company is fighting enforcement cases and proposed class actions targeting nearly every aspect of its business, from “most favored nation” pricing pacts — which have allegedly driven up the online price of virtually everything — to policies that allegedly penalize merchants for avoiding its shipping and logistics services, the shareholders say. 

In addition to damages, the plaintiff investors want:  

  • Amazon leadership to reform its corporate governance and internal procedures to comply with applicable laws and to protect the company and its shareholders from a repeat of the damaging events outlined in the lawsuit. 
  • Restitution from each defendant. 
  • All defendants to forfeit any and all profits, benefits, and other compensation they may have received as a result of their alleged misconduct. 

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