Amazon Wins Motion To Dismiss Antitrust Suit Because Plaintiffs Lacked Antitrust Injury
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  • Amazon Wins Motion To Dismiss Antitrust Suit Because Plaintiffs Lacked Antitrust Injury

    On April 20, 2023, Judge Ricardo Martinez of the United States District Court for the Western District of Washington dismissed with leave to amend a putative class action alleging that Amazon’s linking of favorable website product placement for third-party sellers with the third-party sellers’ purchases of Amazon’s fulfillment services was an unlawful tying arrangement under Sections 1 and 2 of the Sherman Act.  Hogan v., Inc., No. 21-996 (W.D. Wash. Apr. 20, 2023).  Plaintiffs were members of Amazon Prime, an Amazon program offering free or reduced shipping on purchases through Amazon, among other benefits, in exchange for an annual fee.  Plaintiffs alleged that third-party sellers who purchase Amazon’s fulfillment services receive a “Prime Badge” and favorable product placement on Amazon’s website in the “Buy Box,” the section of the product page through which plaintiffs claimed 90% of consumer purchases are made.

    Plaintiffs argued that Amazon’s alleged tying of Buy Box placement to a third-party seller’s purchase of Amazon’s fulfillment services violated Section 1 of the Sherman Act by effectively “coerc[ing]” third-party sellers into purchasing those fulfillment services, thereby decreasing competition in the tied “logistics market” and causing plaintiffs and putative class members to pay higher prices for products purchased through the Buy Box.  Regarding plaintiffs’ Section 2 claim, plaintiffs alleged that Amazon had monopoly power in both the “online retail market in the United States” and in the “market for [product] placement in Amazon’s Buy Box.”  Plaintiffs claimed that by allegedly tying third-party seller Buy Box access to a third-party seller’s purchase of Amazon’s fulfillment services, Amazon allegedly “force[d]” third-party sellers to use its fulfillment services, leading to higher prices for Buy Box products purchased by plaintiffs and putative class members.

    Amazon moved to dismiss plaintiffs’ claims on several grounds, but the Court found it necessary to address only Amazon’s argument that plaintiffs lacked antitrust standing.  In determining whether plaintiffs have antitrust standing, a court must consider (1) whether plaintiffs suffered “antitrust injury,” i.e., the type of injury the antitrust laws were intended to prevent; (2) the directness of the injury; (3) the speculative nature of the harm; (4) the risk of duplicative recovery; and (5) the complexity in apportioning damages.  Focusing on the first factor in this analysis, the Court held that “courts must focus on anticompetitive effects in the market where competition is [allegedly] being restrained.”  Applying this standard, the Court concluded that because plaintiffs never alleged that they, as end consumers, participated in the allegedly harmed logistics market by purchasing Amazon’s fulfillment services, plaintiffs did not suffer the kind of antitrust injury necessary to confer antitrust standing.

    This decision serves as useful guidance on the application of the doctrines of antitrust standing and antitrust injury to allegations of unlawful tying, as well as allegations of unlawful monopolization related to such tying.  The Court made clear that for plaintiffs to have antitrust standing in such contexts, alleged indirect harm to plaintiffs through a tying product is insufficient for antitrust injury, and plaintiffs must directly participate in the tied product market allegedly harmed to show such injury.

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