THE Amazon (NASDAQ:AMZN) is facing a $1 billion class action lawsuit in the U.K., where the company is accused of using a “secret” algorithm to abuse its dominant position in e-commerce.
Amazon is also traded on B3 via the ticker (BOV:AMZO34).
Amazon swayed its customers by directing them to its “featured offer”, resulting in better value deals being hidden and consumers ending up paying more for the products, according to a lawsuit due to be filed with the competition appeals court in October. .
The lawsuit alleges that Amazon exploits its so-called “Buy Box” to direct customers to its own products and items from third-party sellers who use its fulfillment and shipping services.
The shopping box is an area on Amazon product pages that gives customers a “Buy Now” or “Add to Cart” option with one click. Amazon sets certain criteria for sellers to qualify for the Buy Box and, if accepted, gain placement benefits for their listings.
It adds that Amazon uses “a secret, self-advantaging algorithm to ensure that the Buy Box almost always contains merchandise sold directly by Amazon itself or by third-party merchants who pay Amazon high storage and shipping fees.”
The litigation is handled by the specialized law firm Hausfeld. Between 80% and 92% of Amazon purchases are made through the Buy Box tool, according to Hausfeld.
Anyone who lives in the U.K. and made a purchase on Amazon since October 2016 is part of the plaintiff class, Hausfeld added.
Hausfeld estimates the total damage from the litigation in the region at 900 million pounds ($1 billion) if successful. Julie Hunter, an independent consultant, is the lead representative.
“Millions of consumers overpaid and were denied choice. This lawsuit seeks just relief for them,” said Lesley Hannah, one of Hausfeld’s partners handling the litigation. “Amazon is taking advantage of a well-known consumer trend to focus on prominent and engaging displays like the Buy Box.”
“Amazon does not offer consumers a fair choice of options – on the contrary, the design of the Buy Box makes it difficult for consumers to find and purchase better or cheaper options,” added Hannah. “Amazon should not be allowed to exploit its customers in this anti-competitive way.”
An Amazon spokesman said the claim was “without merit and we are confident that this will become clear through the legal process.”
“Amazon has always been focused on supporting the 85,000 businesses that sell their products on our UK store, and more than half of all physical product sales on our UK store come from independent sales partners,” the spokesperson said. “We are always working to present offers that provide customers with low prices and fast delivery.”
The allegation is the subject of an antitrust investigation by the Competition and Markets Authority, Britain’s competition agency. In July, the CMA launched an investigation into the company over concerns that its UK market “could be anti-competitive and could result in worse business for customers”. The European Commission, the EU’s executive arm, has opened a similar antitrust investigation into Amazon’s alleged “self-preference” practices.
Joint actions of this type are not common in the UK. They are “opt-out,” meaning they are brought on behalf of all individuals who fall under the class, unless they specifically choose not to participate, similar to American-style class action cases. A recent change in UK law has opened the way for a series of exclusionary class actions, with further cases against Meta Platforms and Google pending.
“It’s a new process and all the courts involved will think what they want, but there is clearly a trend towards these procedures for multi-billion pound consumer claims,” said David Greene, board member of the London Solicitors Litigation Association.
“It is clear that Amazon will fight the case every step of the way, including class certification, but the Court has recently issued a series of orders for similar actions affirming the exclusionary process. Of course, it is difficult at this stage to assess the likelihood of success in these cases, but the big tech companies are well equipped to fight back.”
With information from CNBC