Amazon Accused of Colluding With Third-Party Sellers in Price Fixing Scheme
Plaintiffs are seeking billions of dollars in damages.
February 4, 2021
Prior 10-Ks show Amazon (AMZN) has faced multiple legal actions including a host of patent infringement allegations. In its 2020 10-K, Amazon reveals it’s now being accused of colluding with third-party sellers to fix prices:
“...alleging, among other things, price fixing arrangements between Amazon.com, Inc. and third-party sellers in Amazon’s stores, monopolization and attempted monopolization of an alleged market in online retail or other submarkets…”
“The complaints seek billions of dollars of alleged actual damages, treble damages, punitive damages, and injunctive relief. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.”
The latest 10-K also reveals Amazon disagrees and intends to defend itself against the European Commission’s allegations that it uses marketplace sellers’ data in ways that violate the commission's competition rules.
For the first time, Amazon has identified other firms offering advertising services as competitors. In its 2020 10-K, Amazon adds a ninth competitor to the list it provides investors:
“...(9) companies that provide advertising services, whether in digital or other formats”
The disclosure is consistent with the segment’s growth. “Other” sales— which Amazon describes as primarily including advertising services and sales related to other service offerings— have more than doubled to $21.4 billion over the past three years. The segment now accounts for 5.5% of Amazon’s sales, up from 4.3% in 2018.
Separately, Amazon includes boilerplate language regarding its intellectual property. In its 2019 10-K, Amazon revealed it uses some of its IP to generate revenue:
“We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights to third parties.”
Interestingly, this line has been removed from Amazon’s 2020 10-K.
It wouldn’t be a shock if Amazon is no longer licensing its IP to third parties; it no longer supports Kiva (warehouse automation robotics) customers. However, identifying which of its proprietary rights it’s no longer licensing, why, and the impact such a decision has on revenue would offer investors a peek at the future.
DuDil has contacted Amazon about the omission and will update subscribers when we have new information.
Lastly, on the earnings call conducted two days prior to the 10-K filing, Amazon forecast approximately $2 billion in COVID-19 related costs in Q1 2021. In the 10-K, Amazon provides additional detail on Q1 2021, warning that its customers may not be able to pay in the short term:
“We expect the effects of fulfillment network capacity and supply chain constraints, elevated collection risk in our accounts receivable, and increased fulfillment costs and cost of sales as a percentage of net sales to continue into all or portions of Q1 2021.”
Amazon’s allowance for doubtful accounts was $1.1 billion as of December 31, 2020, up from $718 million the prior year. Amazon also warns its cost of sales as a percentage of net sales will be negatively impacted for the duration of Q1 2021.
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