The claim, which was made by retailers selling on Amazon’s UK marketplace, is for “illegally misusing their data” and “manipulating the Amazon Buy Box to benefit its own commercial operation and its overall revenues and profit,”
It is said to be the biggest collective action ever launched by UK retailers and alleges that between October 2015 and the current date, Amazon used non-public data belonging to UK retailers on the company’s marketplace, as well as manipulating the Amazon Buy Box, to “engage in a product entry strategy that resulted in sales revenue and profits being diverted from these retailers to Amazon.”
According to BIRA: “such commercially valuable and confidential information helps Amazon decide whether to enter a new product segment based on its earnings and sales potential, which elements of the product to copy, how to price an item, and which consumers to target.”
It continued to say that this information, in combination with the Buy Box, meant that “Amazon knew it could successfully enter and take away profits from UK retailers.”
In response to the allegations, an Amazon spokesperson has stated: “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 continued to say that “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.”
“Illegally using their data”
Many of the retailers involved have said that they were unaware that Amazon was using their data to benefit its own retail operation.
Amazon was charging the retailers 30% commission on every product sold on the site and BIRA has claimed that “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 ecommerce giant has long challenged the suggestion that when it makes and sells its own products, it misuses the information it collects from the marketplace’s third-party retailers. It has similarly challenged that it uses the Buy Box to preference its own retail operations.
In 2022 the UK Competition and Markets Authority (CMA) opened a probe into Amazon alleging it was abusing its dominant market position by giving an unfair advantage to its own retail business and retailers that use its services over other third-party retailers on its marketplace.
According to BIRA, the UK is Amazon’s biggest European market. The CMA raised concerns that Amazon’s access to ‘commercially sensitive data’ relating to third-party retailers could give it an advantage in deciding which products to sell and how to set prices. It also alleged that products sold by third-party retailers were less likely to appear in the ‘Buy Box’ than Amazon’s own products, reinforcing the anticompetitive effect of Amazon’s decisions to take sales away from third-party retailers. Amazon set itself up through these unlawful practices to maximise the profit it would make and, in doing so, it must have known about the damage it would cause to third-party retailers.
To avoid a full investigation and detailed decision from the CMA, Amazon offered a number of commitments to halt these practices. It also agreed to appoint an independent trustee, approved by the CMA, to monitor the company’s compliance with its commitments going forward.
There was a similar investigation undertaken by the European Commission.
“A watershed moment for UK retailers”
Based on expert analysis of the evidence, the total damage caused to UK retailers is estimated to be in the region of £1.1bn including interest.
BIRA’s Chief Executive Andrew Goodacre commented on the claim: “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 behaviour and, if small businesses want to sell online, Amazon is the dominant marketplace in the UK. As a result, for small retailers with limited resources, Amazon is the marketplace to start online trading. Whilst the retailers knew about the large commissions charged by Amazon, they did not know about the added risk of their trading data being used by Amazon to take sales away from them.”
Goodacre continued: “The British public has a strong relationship with its local, independent retailers and ensuring they are not put out of 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 towards retailers obtaining compensation for what Amazon has done. I am confident that the CAT will authorise 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.”
The claim is being funded by Litigation Capital Management (LCM), one of the world’s largest litigation funders, and BIRA has instructed leading international law firm Willkie Farr & Gallagher (UK) LLP on this potentially landmark case.
Into the 'lion's den'
Partner at the firm Boris Bronfentrinker said: “This is precisely the sort of claim that the new collective action regime was brought in for, to enable small and medium size businesses to be able to recover damages caused to them by a huge multinational, where they would not otherwise have such access to justice.”
“The power of Amazon is unrivalled when it comes to the very important online world to which so much commerce has migrated,” continued Bronfentrinker.
“Making itself a must use for retailers, Amazon has then proceeded to cause damage and financial loss to retailers by misusing their confidential data that Amazon was entrusted to keep safe and by preferencing its own retail operations. No individual retailer, no matter how large, is willing to get into the lion’s den and take the fight to Amazon, but fortunately BIRA has shown that it will stand up and fight for UK retailers, backed with the financial muscle of one of the world’s largest litigation funders, and with a first-class team of advisors. Retailers in the UK were entitled to be treated better and fairly by Amazon. They were not, and this claim will deliver back to them the more than a billion pounds in damages that has been caused to them. We are honoured that BIRA has entrusted us to bring such an important claim on behalf of retailers in the UK.”
Under the rules laid down in the Competition Act 1998, all UK retailers who have lost out and are now domiciled in the UK will automatically become part of the claimant class unless they explicitly opt-out. This means that, once the claim is filed, no action will be required by individual retailers as they will automatically be eligible to receive compensation at the conclusion of the claim. Those not currently domiciled in the UK, but who sold on the UK marketplace, will have the opportunity to opt-in and get the benefits of the proposed claim.