Amazon‘s practices around data and algorithms may have Prime-d it for legal trouble—again.
The British Independent Retailers Association (BIRA) brought the £1 billion ($1.3 billion) claim against the e-commerce giant Thursday, alleging that it illegally misused British retailers’ data to furnish its own profits. BIRA filed the action with the Competition Appeal Tribunal (CAT) in London.
According to BIRA, Amazon has used “data that is non-public and belongs solely and specifically to the retailers” selling on its UK marketplace to help the company determine which new product areas it should enter to turn more profits. That, the organization contends, is based on information like earnings and sales potential, how to out-price existing offerings and more.
BIRA says that once Amazon has used retailers’ proprietary data to add products into its sprawling assortment it then uses the Buy Box function to promote its own offerings to consumers at lower prices than existing listings.
The Buy Box is coveted real estate on Amazon, because it’s where the vast majority of sales come from. Amazon’s algorithms select one seller’s listing for a product to promote above the others, based on a variety of considerations.
“By misusing their proprietary data to bring to market rival products that are sold cheaper, Amazon is effectively pushing many of the UK’s independent retailers out of the market,” the organization said. “The consequences of Amazon’s abusive conduct has been to inflate its profits and harm the UK retail sector, especially the smaller independent retailers who are struggling at a time of difficult economic circumstances.”
An Amazon spokesperson said the company believes the claims outlined are untrue.
“We have not seen this complaint, but based on the reporting so far we are confident that it is baseless and that this will be exposed in the legal process,” the spokesperson told Sourcing Journal in a statement. “Over 100,000 small and medium sized businesses in the UK sell on Amazon’s store, more than half of all physical product sales on our UK store are from independent selling partners and the fact is that we only succeed when the businesses we work with succeed.”
BIRA’s allegations are far from the first. In 2022, the UK’s Competition and Markets Authority (CMA) opened an investigation into the company, stating that it had taken advantage of its position in the market by favoring its own services over third-party sellers on the marketplace. Amazon made an agreement with the CMA to freeze the probe. The company did the same with the European Commission when pressed.
Similarly, the U.S.’s Federal Trade Commission (FTC) brought a lawsuit against Amazon, backed by 17 state attorneys, general, alleging that the company “uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power” and squanches the hopes of other sellers trying to earn profit on the marketplace side of the business.
Governments and retailers aren’t the only ones scrutinizing Bezos’ baby. In February, U.S. consumers brought a class-action lawsuit against Amazon, alleging that it exercises too much control over the Buy Box, “nudge or trick [consumers] into purchasing higher-priced offers despite the availability of lower-priced offers for the same product with equal or better estimated delivery times.”
According to BIRA, the collective action claim is the largest to be filed under the UK’s Competition Act of 1998.
A collective action functions similarly to a class action in the United States, but the main difference is that, in a collective action, afflicted parties have to opt in to participating; in a class action, parties have to opt out if they do not want to be included. BIRA estimates that about 35,000 retailers in the UK could be eligible to participate in this particular action.
Many of those retailers are small businesses, it claims. No matter the size of the retailer, though, Amazon charges a 30 percent commission on products sold through the site, BIRA said.
Already, that docks the profit retailers can turn on the marketplace, which may seem like a necessary evil to retailers who would miss out on making sales if they migrated off of Amazon, said Andrew Goodacre, BIRA’s chief executive.
“One might ask, why would an independent retailer use Amazon if it is so damaging to their business? In reality, we have seen a significant shift in consumer buying behavior and, if small business[es] want to sell online, Amazon is the dominant marketplace in the UK,” Goodacre said.
The claim could be retribution for what the retailers allege is scheme-heavy conduct from the Prime purveyor. Goodacre said he hopes that, through this action—which will need to be authorized to proceed by the CAT—retailers can reclaim the damages they deserve.
“The British public has a strong relationship with its local, independent retailers, and ensuring they are not put out business by Amazon’s illegal actions is a key driving force behind this collective action. The filing of the claim today is the first step toward retailers obtaining compensation for what Amazon has done,” he said in a statement. “I am confident that the CAT will authorize the claim to go forward, and I look forward to the opportunity to present the case on behalf of UK retailers. This is a watershed moment for UK retailers, but especially for small independent retailers in this country.”
