Zulily sued Amazon for its “anticompetitive” behavior aimed at forcing the company to end its discounted pricing practice which caused “substantial revenue losses” for the firm.
Amazon has become the world’s biggest online marketplace through “anticompetitive conduct that destroys its competitors and raises prices for consumers everywhere,” the Dec. 11 lawsuit stated. It cited a Federal Trade Commission (FTC) complaint against Amazon to state that the retail giant has “specifically targeted” Zulily as an emerging online superstore at least since 2019. “Amazon could not tolerate Zulily’s ‘primary strategy’ to offer consumers the ‘lowest price online’ or its displaying Amazon’s prices next to Zulily’s to show consumers that Zulily’s were better.”
Instead of competing with Zulily on merits, Amazon set about to “destroy” the firm. This was done by “coercing” third-party retailers and wholesale suppliers to agree to “price parity” where they artificially raised product prices listed on Zulily at or above Amazon’s prices.
The retail giant also punished sellers who did not agree to Amazon’s coercion, the lawsuit stated. This included disqualifying a seller from using a “Buy Box” at Amazon used by shoppers to buy an item or add a product to their cards. In some instances, Amazon imposed “total banishment” of such sellers from its marketplace.
“The plot against Zulily was part of Amazon’s overall scheme to eliminate horizontal price competition among all online retailers marketwide; to make Amazon’s prices appear—falsely—to be the lowest without Amazon having to really compete; and to groom consumers not to look anywhere besides Amazon for the best retail pricing.”
Due to the pressure exerted by Amazon, Zulily suppliers were forced to comply with the e-commerce giant’s “price-fixing terms” as they could not afford to lose sales through Amazon. They were forced to either instruct Zulily to raise prices to as high as Amazon’s prices, pull out some products from Zulily, or leave Zulily completely.
In a span of just a year, Amazon’s tactics resulted in almost half of suppliers selling at both Zulily and Amazon to end their relationship with Zulily, the lawsuit said. Just a few months after being subject to Amazon’s “exclusionary conduct,” Zulily had to discard the “Best Price Promise” to customers and remove all price comparisons with Amazon from the website.
“The conduct has caused Zulily substantial revenue losses and reduced traffic to Zulily’s website. It denies Zulily the scale necessary to compete in the market, ‘stifles [competition], deadens price competition, reduces output, and deprives the American public of lower prices.’”
Amazon Response, Zulily Shutting Down
In an emailed statement to the The Epoch Times, Tim Doyle, Amazon spokesperson called the lawsuit allegation “false.”“The retail industry is dynamic and strong with many retailers succeeding, including small and medium-size businesses who are thriving, growing, and innovating. That includes many in our store, and they now make up more than 60 percent of sales on Amazon,” he said.
“We’re proud of the substantial investments we make to provide entrepreneurs with tools and resources to establish and build their brands, connect with more customers, and create jobs in their communities.”
The lawsuit comes as Zulily appears to be shutting down. The company’s online store has listed items at discounts with a statement: “Final sale. All items must go.”
In a recent post on LinkedIn, a Zulily employee said that “the company I called home and have loved working for the past 3+ years, is closing in the coming months.”
Another Zulily employee said in a LinkedIn post, “As many in my network may now know, Zulily is unfortunately closing its doors in the upcoming months.”
Amazon’s Anticompetitive Behavior
Amazon is facing Zulily’s complaint while also dealing with a lawsuit from the Federal Trade Commission and 17 states alleging that the e-commerce giant’s initiatives prevent rivals as well as sellers on its platform from lowering product prices, degrades overall quality for customers, overcharges sellers, suppresses competition, and prevents rival companies from fair competition.By stifling competition, “Amazon ensures that no current or future rival can threaten its dominance,” said the FTC in a Sept. 26 press release.
“Amazon’s far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch hundreds of thousands of products sold by businesses big and small, and affect over a hundred million shoppers.”
With a focus on anti-competitive practices, John Newman, deputy director of the FTC’s Bureau of Competition, said, “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”
Last month, a less-redacted version of the FTC’s antitrust lawsuit against Amazon came to light. It alleged that the company was using a secret algorithm called “Project Nessie,” which raised the prices of products listed on its website.
This ended up making other retailers also raise prices to match with Amazon. The practice is said to have netted the company an extra $1 billion.
“Aware of the public fallout it risks, Amazon has turned Project Nessie off during periods of heightened outside scrutiny and then back on when it thinks that no one is watching,” the complaint said.
