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Anti-competition Probes and Overexpansion Lead to Multiple Class Actions Against Amazon

Amazon Faces at Least Two Competing Securities Class Actions



Case Name: Amazon.com

Court: Western District of Washington

Case No: 22-CV-00617, 2:22-CV-907

Ticker: AMZN

Complaint 1. Anticompetitive Practices

On June 3, 2019, the House Judiciary Committee issued a report titled “Investigation of Competition in Digital Markets.” The committee alleged that Amazon used its inside view of third-party sales data of products marketed on Amazon, but not made by Amazon, to create and promote its own versions of many of these products, sold under the label “Amazon Basics.” The committee found that Amazon engaged in a number of anti-competitive practices, including making replica copies of third-party products, pricing its products below cost, and promoting Amazon Basic versions over competitors.

The committee wrote that, “Amazon’s market power is at its height in its dealings with third-party sellers. The platform has monopoly power over many small- and medium-sized businesses that do not have a viable alternative to Amazon for reaching online consumers.”

Nearly three years after this report, on March 9, 2022, the Committee referred Amazon to the Department of Justice for potential criminal violations, namely for “fail[ing] to comply with multiple attempts to clarify misleading testimony and statements before [the] Committee.”

The next ax fell on April 6, 2022, when the Securities and Exchange commission announced it had begun investigating Amazon for anti-competitive practices. “On this news,” plaintiffs Badgley Mullins Turner wrote in their class action complaint filed May 6, 2022, “Amazon’s stock price fell $105.98 per share, or 3.2%, to close at $3,175.12 per share on April 6, 2022.”

Finally, on April 28, 2022, Amazon reported its first quarterly loss in seven years. More on this below.

Plaintiffs allege that Amazon’s anti-competitive behavior led to a heightened risk of regulatory inquiries and that its revenues derived in part from these “unsustainable” methods.

Complaint 2: Hubris

In a similar complaint filed by the law firm Tousley Brain Stephens on June 28, 2022, plaintiffs echo these allegations and add one more: “an overly aggressive expansion of its warehouse and fulfillment network that would expose it to billions in unnecessary 'incremental costs' which would ultimately and adversely impact its financial result.”

2020 year was a boom time for Amazon. It may be hard to recall, but squint just-so and you may summon up the mood of the world two years ago: the entire world shut down, we were all afraid to go to stores, and vast sections of the world turned to online delivery services like Amazon for shopping.

That summer may have felt like a new normal had arrived and that it would last forever, and the convenience of online shopping is certainly nice. But the level of expansion descibed in the complain may have been a bit much:

"At the end of 2019, Amazon’s distribution, warehouse and data center space covered approximately 192 million square feet. Beginning in 2020, the Company engaged in a massive expansion spree, expanding its data and fulfillment centers until they covered approximately 387.1 million square feet by the end of 2021, doubling its size in two years and resulting in an excess of space and employees that forced the Company to pivot into “cost efficiency”” mode.

On April 28, 2022, Amazon posted its first quarterly loss in seven years. The loss reflected, in part, $2 billion in “incremental costs” arising from the Company’s doubling of its warehouse, fulfillment, and data center space…

This over-expansion forced the Company to pivot into “cost efficiency” mode, halting further expansion and even cancelling some planned expansion projects.

On this news, Amazon’s stock fell 14.05% from $144.59 per share, to $124.28 per share on close on April 29, 2022."

Chicago Clearing Corporation is tracking both of these class action complaints. In fact, we track every securities class action against every corporation in America. Should this case, or any litigation against any corporation, settle, we will store all of the key information in our database and share it with our clients on our website. Call us today at 312-204-6970 to not only keep up with the Amazon litigations, but with hundreds more filed each and every year.

 


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