Amazon wins lawsuit over third-party sellers, capacity expansion challenge

Post by: Bandan Preet

A U.S. judge has dismissed a lawsuit that accused Amazon.com of misleading its shareholders about how it treated third-party sellers and its plans to expand its business. The lawsuit claimed that Amazon hid important details, which later played a role in a major antitrust case filed by the Federal Trade Commission (FTC).

On Monday, U.S. District Judge John Chun in Seattle ruled against the shareholders and dismissed the case "with prejudice." This means that the lawsuit cannot be filed again.

What the Shareholders Claimed

The shareholders accused Amazon of secretly using an algorithm to make sure its private-label products were always priced lower than similar products from third-party sellers. They argued that this practice forced outside sellers to raise their prices, making shopping more expensive for customers.

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They also claimed that Amazon hid problems related to expanding its warehouses and delivery network too quickly. As a result, in April 2022, the company reported a $2 billion loss due to excess capacity, which caused its stock price to drop sharply. This was Amazon’s first quarterly loss since 2015.

Why the Judge Rejected the Case

Judge Chun ruled that the lawsuit did not provide strong enough evidence to prove that Amazon’s top executives, including former CEO Jeff Bezos and current CEO Andy Jassy, deliberately misled investors.

He said there was no clear proof that these executives knowingly hid information about favoring Amazon’s products over those of third-party sellers. The judge also found no strong evidence to show that Amazon’s leaders expanded the company’s operations too aggressively while knowing it would cause problems.

According to Judge Chun, the complaint made it seem like Amazon was simply using "sharp business practices" and was mainly focused on increasing profits, rather than intentionally trying to deceive shareholders.

Amazon and the FTC’s Ongoing Legal Battle

In September 2023, the FTC filed a lawsuit against Amazon, accusing the company of using its monopoly power to prevent other sellers from lowering prices. The FTC argued that this behavior made products more expensive for customers and hurt their overall shopping experience.

Eighteen U.S. states and Puerto Rico have joined the FTC in this legal battle. A nonjury trial before Judge Chun is scheduled for October 2026.

Case Details

The shareholder lawsuit involved people who owned Amazon shares between February 1, 2019, and April 28, 2022.

The case is officially known as Joyce v. Amazon.com Inc et al, filed in the U.S. District Court for the Western District of Washington, with case number 22-00617.

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