Amazon gets a clean chit in fraud lawsuit filed by shareholders

A US District court has cleared Amazon of all charges in a lawsuit filed by its shareholders in late 2022, alleging fraud and misrepresentation of facts. On Monday, the court dismissed the lawsuit with prejudice, which means the case is permanently closed. 

Amazon shareholders accused the e-commerce giant of hiding an algorithm that favoured Amazon’s branded products over those of third party sellers, resulting in inflated prices for consumers. They also accused Amazon of concealing the over-expansion of its  infrastructure and fulfillment network, which led to a drop in the company’s stock price in April 2022 when it reported substantial costs related to excess capacity. This contributed to Amazon’s first quarterly loss since 2015. 

US District judge John Chun ruled that the evidence was insufficient to prove that executives, including Jeff Bezos or Andy Jassy, knew or concealed the algorithm that favoured Amazon’s products. The judge also stated that there wasn’t enough evidence to back the allegation that the executives intended to defraud shareholders by making Amazon appear as successful as possible to sell stock at inflated prices. 

The e-commerce giant is also facing an anti-competition lawsuit filed by US antitrust regulator Federal Trade Commission (FTC) and attorneys general of 17 US states in September 2023. The FTC lawsuit accuses Amazon of being a monopolist that uses

“interlocking anticompetitive” and “unfair strategies” to illegally maintain its monopoly. 

The lawsuit also accuses Amazon of using its monopoly power to overcharge third-party sellers, prevent them from lowering prices, degrade quality for consumers and stifle innovation. 

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said the then FTC chair Lina Khan, who was replaced by Andrew Ferguson after Donald Trump won a second term as US president in November 2024. 

Under Khan’s leadership, the FTC challenged corporate acquisitions worth billions of dollars and launched investigations into monopolistic practices of big tech firms, including Amazon and Meta. Khan also raised broader concerns about market power and the potential for long-term harm to competition. This posed a significant threat to the business models of many big tech companies, which have grown through acquisitions and monopolistic practices. 

The FTC lawsuit is scheduled to be heard in 2026 by the same judge John Chun who dismissed the shareholder’s lawsuit. 

Last October, Chun partially granted Amazon’s motion to dismiss the FTC lawsuit. Chun ruled that the case will proceed in two parts: first, to determine Amazon’s liability, and second, to address potential remedies. The October ruling dismissed certain claims by FTC, narrowing the scope of the lawsuit. Since the ruling was sealed, the details of what was dismissed is not available to the public. 

Amazon is under scrutiny in several countries for alleged monopolistic practices. In December 2021, Italy’s antitrust regulator slapped a fine of 1.13 billion euros on Amazon for abusing its market dominance and harming competitors. 

In India, Amazon and its rival Flipkart have been under investigation by antitrust regulator, the Competition Commission of India (CCI), since 2020 following a complaint filed by the Delhi Vyapar Mahasangh, a trade body, which accuses them of favoring certain sellers. 

CCI later accused Amazon and Flipkart of using sellers to challenge the investigation by filing petitions in multiple courts across India. This forced CCI to file a petition in the Supreme Court of India to consolidate all cases challenging its investigation and transfer them to a single High Court. In January, the apex court directed the Karnataka High Court to hear the cases expeditiously. 

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