Explainer: Amazon Faces £2.7 Billion Lawsuit In UK Over Alleged Market Dominance Abuse
Amazon is facing a fresh class action suit in the UK seeking damages exceeding £2.7 billion. This lawsuit, filed before the UK's Competition Appeals Tribunal, is brought by Andreas Stephan, a professor of competition law at the University of East Anglia and head of its Law School. Stephan represents over 200,000 UK-based third-party sellers on Amazon who allege the company has abused...
Amazon is facing a fresh class action suit in the UK seeking damages exceeding £2.7 billion. This lawsuit, filed before the UK's Competition Appeals Tribunal, is brought by Andreas Stephan, a professor of competition law at the University of East Anglia and head of its Law School. Stephan represents over 200,000 UK-based third-party sellers on Amazon who allege the company has abused its dominant market position.
Amazon is accused of prioritizing its own retail offerings over those of third-party sellers. The company allegedly favours its own logistics service, Fulfilled by Amazon (FBA), which disadvantages other logistics providers.
The lawsuit claims Amazon unfairly ties access to its Prime membership to the use of FBA.
Amazon is also claimed by the complaint of making it more difficult for third-party sellers to offer their products at lower prices on other platforms. According to the complaint, these practices have led to increased costs, lost sales, and higher fees for third-party sellers.
The lawsuit automatically includes all eligible third-party sellers unless they explicitly choose to opt-out. There are no costs for sellers to participate, and those included in the lawsuit will be entitled to a share of any compensation if the claim is successful.
The case is financially backed by Innsworth Capital Limited, a major litigation funder known for supporting various high-profile collective action lawsuits against major tech companies in the UK and Europe.
Amazon has argued that over 100,000 small and medium-sized businesses in the UK sell on Amazon's platform and that the company only succeeds when its partners succeed.
This is not the first instance of Amazon facing such legal scrutiny in the UK. Earlier this month, the British Independent Retailers Association filed a similar lawsuit seeking £1.1 billion in damages on behalf of its members.
Dominant Position
A dominant position refers to a situation where a company or entity holds a significant share of a market, giving it substantial power to influence market conditions, set prices, and exclude competitors. This dominant position can lead to anti-competitive practices if the entity uses its power to unfairly hinder competition, control prices, or dictate terms that disadvantage other market participants. The dominant position of a company depends on the following factors:
- Market Share: While there is no fixed percentage, a share of over 40% is frequently seen as indicative of dominance.
- Market Power: The ability to control prices, restrict output, or exclude competitors without losing significant market share.
- Barriers to Entry: High barriers to entry in the market can contribute to a company's dominance, as they prevent new competitors from entering the market.
- Economic Strength: Dominance can also be reflected by the financial resources of a company.
Under EU competition law, Article 102 of the Treaty on the Functioning of the European Union (TFEU), a company abuses its dominant position if it imposes unfair purchase or selling prices, limits production, markets, or technical development, applies discriminatory conditions, or ties additional obligations.
In the United States, similar principles apply under the Sherman Act, where monopolistic practices and abuse of market dominance are prohibited. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) enforce these laws.
In India, according to Section 4 of the Competition Act, an enterprise is considered to be in a dominant position if it can operate independently of competitive forces prevailing in the relevant market or if it can affect its competitors, consumers, or the market in its favour.
Section 4 of the Competition Act explicitly prohibits the abuse of a dominant position. An enterprise is said to abuse its dominant position if it imposes unfair or discriminatory conditions in the purchase or sale of goods or services. In 2018, the CCI imposed a fine on Google for abusing its dominant position in the online search market by promoting its own services over competitors.