Amazon Faces $1 Billion UK Lawsuit For Using 'Self-Favoring Algorithm' on its Products

Amazon is being sued for $1 billion by a class action in the United Kingdom on allegations that it abused its market dominance by employing a "secretive and self-favoring algorithm."

According to the lawsuit, which is set to be filed with the Competition Appeal Tribunal this month, Amazon harms its customers by diverting them to its "featured offer," which results in better-value discounts being concealed and consumers ending up paying more for products.

The "Buy Box" Scheme

In the complaint, Amazon uses the 'Buy Box' to promote its own goods and third-party merchants that use its shipping and fulfillment services.

Customers may 'buy now,' 'add to basket,' or 'see details' with a single click in the Buy Box on Amazon product pages. If a seller meets the requirements stated by Amazon to qualify for the Buy Box, their product listings will be given priority placement on the search results pages.

It also accused Amazon of utilizing a "secretive and self-favoring algorithm" to ensure that its products or third-party sellers who pay Amazon high storage and shipping costs are always shown in the Buy Box.

Hausfeld and the Lawsuit

Hausfeld, a specialist legal firm, is handling the case. According to them, between 80% and 92% of all Amazon transactions are completed via the Buy Box.

The law firm further clarified that the claimant class includes everyone who resides in the UK and has made a transaction on Amazon since October 2016.

If Hausfeld is successful in court, it will collect damages from the defendants totaling over £900 million ($1 billion).

Millions of customers have been overcharged and left with few options. According to Lesley Hannah, one of the partners at Hausfeld directing the case, Amazon does not give customers a fair variety of alternatives; rather, the design of the Buy Box makes it harder for them to identify and acquire better and cheaper options.

This action seeks appropriate reparation for the e-commerce shoppers, Hannah added.

The UK Competition and Markets Authority (CMA) is investigating the allegation of antitrust violations. Concerned that its UK marketplace may be "anti-competitive" and potentially result in a poorer offering for customers," the CMA launched a review in July. Amazon's "self-preferencing" methods are also under examination by the European Commission.

Amazon's Reaction

A representative for Amazon has said that the allegation is "without merit" and that they are optimistic that it will become evident via the judicial process.

Over 85,000 companies sell their goods on Amazon's UK shop, and independent selling partners represent more than half of all physical product sales there, the spokesperson told CNBC. The company claimed that it prioritizes featuring deals that provide shoppers with quick shipping at a reduced cost.

This article is owned by Tech Times

Written by Trisha Kae Andrada