Shares in U.S. tech giant Amazon (AMZN) were flat today as it gets set to face a class action lawsuit from angry customers.
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U.S. District Judge John Chun has ruled that Amazon must face the lawsuit accusing it of imposing inflated fees on third-party sellers that have been passed along to consumers.
Most Favored
The lawsuit includes customers who bought more than five items from Amazon’s marketplace after May 2017.
Several customers initially sued Amazon in 2021, alleging its online marketplace restricts third-party sellers from offering lower prices on other platforms, a practice known as a platform most-favored-nation (PMFN) clause.
This matters given the importance of third party sellers to Amazon’s overall revenue stream – see below:
In his ruling, Chun rejected Amazon’s suggestion that the plaintiffs failed to show the existence of this policy, finding the company “has implemented certain policies and practices concerning third-party sellers that function” as such.
“Based on the above evidence, Plaintiffs have presented common evidence that shows, on a more probable than not basis, that a PMFN policy exists,” Chun wrote.
Nothing New
The arguments in the case are reminiscent of the claims brought by the Federal Trade Commission (FTC) and more than a dozen states, which sued the tech giant over alleged antitrust violations in 2023.
The government accused Amazon of using anti-competitive measures to prevent sellers from offering lower prices, keeping prices higher even beyond its own platform.
Amazon has defended its practices declaring that they “benefit consumers and are the essence of competition.”
The tech giant has history with Chun. Earlier this year, Amazon won a proposed class action lawsuit that alleged the e-commerce retailer willfully mislead investors about its treatment of third-party sellers and capacity expansion plans. Amazon was accused of using unfair techniques to lower the prices of its private-label products compared to those of outside merchandise, resulting in higher prices for consumers overall.
The class action lawsuit covered shareholders who bought AMZN stock between February 1, 2019, and April 28, 2022. Chun dismissed the lawsuit with prejudice, meaning the proposed class action cannot be refiled.
Insights from Amazon’s Risk Analysis Tool
As of the second-quarter this year, the e-commerce retailer is at maximum risk from two aspects: Finance & Corporate risks and Legal & Regulatory risks. In fact, Amazon’s Legal & Regulatory risks are higher at 25%, as compared to the Sector Average. Studying a company’s risk profile can give investors thorough insights into the possible risks and take an informed investment decision.
Is AMZN a Good Stock to Buy Now?
On TipRanks, AMZN has a Strong Buy consensus based on 44 Buy and 1 Hold ratings. Its highest price target is $300. AMZN stock’s consensus price target is $264.13, implying a 17.21% upside.
