Zulily Lawsuit Claims Amazon Abused ‘Monopoly Power’
More than a month after the Federal Trade Commission filed an antitrust lawsuit against Amazon, online retailer Zulily has filed its own lawsuit against accusing the e-commerce giant of coercing suppliers to price-fix.
According to the suit, which was filed on Dec. 11 in U.S. District Court in Seattle, where both businesses are based, Zulily claimed that Amazon has targeted the limited-time online seller as it competed for marketshare. Zulily alleged that rather than competing on its own merits, Amazon set out to “destroy” the e-tailer instead, through tactics such as coercing third-party retailers and wholesale suppliers to artificially raise Zulily prices at or above Amazon’s. The complaint also said that Amazon punished sellers who did not comply.
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The lawsuit follows a 172-page complaint filed in September and updated in November by the FTC and 17 state attorney generals, accusing Amazon of antitrust violations. That suit details illegal strategies Amazon is accused of using to increase consumer prices and boost profits. One example was a secret algorithm called “Project Nessie,” that allegedly inflated prices and was described as an “unfair method of competition.”
The FTC’s suit also outlined how Amazon targeted other retailers, such as Zulily, which advertised lower prices of products alongside identical items with higher prices on Amazon or Walmart.com as part of its “Best Price Promise.” The complaint claimed that Amazon found that “this price competition was intolerable—and so it set out to destroy [Zulily].”
In its lawsuit, Zulily reiterated an example presented in the FTC filing, which alleged that Amazon revoked placement in its “Buy Box” program for Zulily suppliers, excluding them from the benefits of the high-exposure feature that generates 98 percent of the retailer’s sales.
An Amazon spokesperson responded to Zulily’s lawsuit, panning the e-tailer’s “false” claims.
“The allegations made in this lawsuit are false,” said Tim Doyle, Amazon spokesperson. “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% of sales on Amazon. 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.”
On Dec. 8, Amazon filed a motion to dismiss the FTC’s complaint, claiming that the suit “implausibly, and illogically, assumes that Amazon’s efforts to keep featured prices low on Amazon somehow raised consumer prices across the whole economy.” The motion to dismiss also claimed that Amazon discontinued “Project Nessie” in 2019.
Earlier this month, Zulily announced the company will shut down with layoffs that will include around 800 workers across its offices and warehouses. The retailer made moves to permanently close its Seattle headquarters, laying off 292 workers in the process. Layoffs are set to begin Feb. 7. These job losses follow several previous rounds of layoffs this year.
Along with layoffs, Zulily began liquidating inventory, dropping prices by 70 to 85 percent off apparel and home categories including brands such as Reebok, Cole Haan, Sorel and Lucky Brand. Zulily has stopped taking orders from outside the U.S., while American shoppers can continue to order until the site is shut down.
Earlier this year, Zulily’s former owner, Qurate Retail, sold the business to Los Angeles-based private equity firm Regent LP. Prior to the sale, the e-tailer’s revenue dropped 17 percent to $192 million for the first quarter of 2023.
Launched in 2009 as a flash sale site, Zulily became a favorite of moms searching for discounted name-brand clothing and home goods both for themselves and their kids. In 2015, the platform was acquired by QVC for $2.4 billion. QVC parent company Liberty Interactive Corp. rebranded as Qurate Retail in 2018.
The company brought on former Nordstrom executive Terry Boyle as president and CEO in 2022. He left Zulily this past October.
Editor’s note: This article was updated on Dec. 13 with Amazon’s statement.
