Amazon Inc. investors have delivered company leadership a suit for exposing the corporation to a “massive financial hit” caused by news of alleged antitrust violations and an unnecessarily rapid expansion that later had to be scaled back. The suit, filed in federal court in Delaware, names Jeff Bezos and 19 other current and former board members and executives.
This shareholder derivative action accuses leadership 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 corporate leaders were hailing the success of Amazon’s private-label brands, the investors say they were secretly exploiting their monopoly power over third-party sellers on Amazon’s Marketplace. The company allegedly uses merchants' non-public data to compete with them and give Amazon brands preference over the third-party sellers, according to the suit. Amazon publicly refers to sellers as “partners,” but executives allegedly refer to them privately 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.
As they say, "the cover up is worse than the crime." Conduct like that alleged by the shareholders has to lead consumers to wonder what other methods Amazon is employing to gain an upper hand over small businesses and to take advantage of consumers.
Amazon needs to shore up its competition practices. Otherwise, due to its size and past behaviors, it will continue to face intense scrutiny for some time to come.
Edited by Tom Hagy for MoginRubin LLP.