Amazon faces £900 million lawsuit for favouring its own products
Amazon is facing a £900 million lawsuit in the UK over allegations that it has favoured its own products and caused millions of UK customers to pay higher prices for products sold on Amazon.co.uk and the Amazon mobile app.
The opt-out collective action, to be filed in the Competition Appeal Tribunal in London, will allege that Amazon has abused its status as the dominant online marketplace and harms customers by channelling them towards its “featured offer”.
This featured offer, prominently located in the “Buy Box” on Amazon’s website and mobile app, is the only offer considered and selected by the vast majority of users, many of whom trust Amazon to provide them with the best deal.
However, Amazon uses a secretive and self-favouring algorithm to ensure that the Buy Box nearly always features goods sold directly by Amazon itself, or by third-party retailers who pay hefty storage and delivery fees to Amazon, it will be alleged.
The Buy Box is designed and presented in a way that effectively prevents millions of consumers from navigating the site to find cheaper offers, or better delivery options, for the same product, according to the claim. Other sellers, who do not pay for Amazon’s fulfilment services, are nearly always excluded from the Buy Box, stifling their ability to offer consumers a better deal, and leaving consumers out of pocket.
Such manipulation of consumers is "breach of Amazon’s obligation as the dominant marketplace" not to distort competition, according to the claim. They will seek damages from Amazon estimated in the region of £900 million.
Julie Hunter, a longstanding advocate of consumer rights, is seeking to represent the interests of tens of millions of Amazon users in the collective action, which is due to be filed before the end of October.
Anyone who lives in the UK and made purchases on Amazon.co.uk or on the Amazon app since October 2016 is an eligible member of the claimant class. In accordance with Competition Appeal Tribunal rules, the collective action is being filed on behalf of all potential claimants without them needing to actively opt in to the claim.
The claim will accuse Amazon of breaching section 18 of the UK Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union. It coincides with increased concern amongst the public and policymakers about Amazon’s dominant position as both a marketplace and a market participant (see Investigations and regulatory decisions, below).
The European Commission is pursuing two formal antitrust investigations into Amazon. One of these, initiated in November 2020, is evaluating the same alleged “self-preferencing” by Amazon as is alleged in the UK claim.
The Commission’s preliminary finding was that the rules and criteria for the Buy Box unduly favour Amazon's own retail business, as well as marketplace sellers that use Amazon's logistics and delivery services. The Commission is currently evaluating commitments offered by Amazon to address these concerns.
In July 2022, the Competition and Markets Authority announced that it was investigating Amazon’s business practices, including how it sets the criteria for selection of the featured offer. The CMA indicated that its investigation followed on from that conducted by the European Commission.
Lesley Hannah, one of the partners at Hausfeld & Co LLP leading the litigation, said: “Most consumers use the Buy Box when purchasing products on Amazon – estimates range from 82% to 90%. This means that millions of consumers have paid too much and been denied choice. This action seeks fair redress for them.
“Amazon takes advantage of consumers’ well-known tendency to focus on prominently-placed and eye-catching displays, such as the Buy Box. Amazon doesn’t present consumers with a fair range of choices – on the contrary, the design of the Buy Box makes it difficult for consumers to locate and purchase better or cheaper options. Amazon should not be allowed to take advantage of its customers in this anticompetitive way.”
“Competition laws are there to protect everyone. They ensure that individuals can make genuine and informed choices, and are not simply led into making selections which benefit the companies they interact with. Fairness is at the heart of competition law and consumers are not being treated fairly by Amazon.”