Lawsuits and Fines Plague Amazon to Kick off 2017
Despite its recent announcement of plans to create 100,000 jobs during the next 18 months, 2017 is off to a rocky start for Amazon. Just days before the new year, RUN-DMC Brand filed a lawsuit against Amazon (and others, including Walmart and Jet.com) seeking $50 million in damages for trademark infringement, dilution, and unfair competition.
RUN-DMC’s complaint alleges that the defendants are advertising, manufacturing, selling, and distributing multiple products with the iconic 1980s rap/hip-hop group’s RUN-DMC trademark without the permission of RUN-DMC, which is owned by former band member, Darryl McDaniels. Run-DMC alleges that Amazon directly advertises and sells infringing products, as well as fulfills orders for infringing products sold by third parties who are also named in the lawsuit.
Although this complaint did not layout out an abundance of evidence against Amazon – unlike the complaint by DRTV companies Allstar Marketing Group LLC, Ontel Products Corp., and Ideavillage Products Corp. (filed just three weeks before RUN-DMC’s complaint) – the key is that, similar to the DRTV complaint, Amazon is accused of direct infringement, rather than just contributory or vicarious infringement claims, which Amazon has been able to successfully avoid liability for in the past.
In addition to troubles in the U.S., Amazon has agreed to pay $1.1 million Canadian in penalties and costs to the Canadian Competition Bureau to settle a matter regarding its pricing practices. The fine comes after a two-year investigation into list prices on Amazon’s Canadian site, Amazon.ca. According to the Competition Bureau, “Amazon often compared its prices to a regular price – or ‘list price’ – signaling attractive savings for consumers.” The Bureau concluded that these claims created the impression that prices for items offered on Amazon.ca were lower than usual market prices, even though they may not have been. The investigation found that Amazon relied on its suppliers to provide list prices and did not verify that those prices were accurate. The savings claims at issue were not only advertised on Amazon.ca, but were also e-mailed to customers and displayed in online ads.
Amazon has since made changes to these anticompetitive practices in Canada and now validates list prices provided by suppliers on the Canadian platform. According the Bureau, new practices have also been applied to Amazon.com, which was engaging in the same behaviors as its Canadian counterpart. Although unclear as to when exactly the plan to change this practice was set in motion, in May 2016, former general counsel of the U.S. Senate’s antitrust subcommittee, Seth Bloom, stated that he had not heard anything said about how Amazon was harming consumers (which is a necessary element in the test for antitrust violations). Just a few months later, amidst antitrust probes in Japan and Europe, Amazon hired Bloom to lobby on its behalf.
Although not insignificant, a million-dollar payout is just a drop in the bucket for the online behemoth, which has a market value of approximately $250 billion. The point, however, is that many more drops in the bucket could add up as an increasing number of lawsuits continue to be filed by similarly harmed marketers. In spite of these issues, marketers, distributors, and consumers alike love Amazon’s convenience, free shipping for Prime customers, and simple return policies. The point is not to take down Amazon with fines and lawsuits, but rather, persuade Amazon into changing its illegal and deceptive practices. The more product owners and governments take action against Amazon’s egregious counterfeit and knockoff goods problem and deceptive practices, the more likely Amazon will be forced to reform.
As always, stay tuned to this space for updates.