To steal a phrase from the movie Network, eBay is mad as hell, and is not going to take it anymore.
The target of eBay’s ire is Amazon, against whom it filed a lawsuit in Santa Clara County, California earlier this week, alleging that Amazon has engaged in and orchestrated a long-term scheme to steal its biggest sellers.
And “scheme” is not a rhetorical flourish on PYMNTS part: The word literally appears in the 18-page court filing 23 times. eBay’s essential allegation is that after being tipped off by a seller on the platform, an internal investigation revealed that Amazon has allegedly been creating fake eBay seller accounts so they could use eBay’s internal messaging system to reach out to eBay sellers – and invite them to come sell on Amazon’s marketplace instead.
“For years, and unbeknownst to eBay, Amazon has been engaged in a systematic, coordinated effort to infiltrate and exploit eBay’s proprietary M2M system on eBay’s platform to lure top eBay sellers to Amazon,” the filing read. “The scheme is startling in breadth — involving large numbers of Amazon representatives (“Amazon reps”), targeting many hundreds of eBay sellers and spanning several countries overseas and many states in the United States (including California).”
The filing also referred to Amazon as “an 800-pound gorilla with a hand grenade" – a phrase apparently borrowed from a CNN story on the incredible power Amazon has over its marketplace sellers.
The suit further argues that Amazon’s recent focus on its marketplace of third-party sellers essentially mimics eBay’s longtime business model – and that its attempts to poach sellers from their site isn’t just spirited competition between rivals, but an act of deliberate corporate sabotage. Moreover, the lawsuit alleges, it is an act of corporate sabotage that eBay believes came directly from Amazon’s headquarters, pointing out that the accounts used to send the messages were from devices connected to Amazon IP addresses.
The messages, the suit noted, were all remarkably similar – and even identical in many cases, mostly following the form of the excerpts from the lawsuit below.
“I am part of what you would call a hunter/recruiter team which actively searches for sellers we believe can do well on the platform”; “I work for Amazon and we are trying to recruit a couple sellers”; and “I work for a small team here at Amazon that recruits a finite number of high-potential sellers.”
All in, the lawsuit claims that around 50 Amazon employees were sending messages to eBay sellers, asking if they’d be interested in also selling on Amazon.
eBay has sent a cease and desist letter to Amazon, and is also demanding “monetary relief” to cover damages, though no amount has been specified. They have requested restitution of Amazon’s “unlawful proceeds” in the form of punitive damages “as may be awarded at trial.” The filing also made clear that eBay believes it has been harmed in way that not even money can make whole.
Amazon has offered no official comment on the suit, but has said it is conducting an investigation into the allegations.
“eBay has suffered irreparable harm as a result of Amazon’s activities, and will continue to suffer irreparable injury that cannot be adequately remedied at law," the suit said.
But is it true? That is a little bit harder to suss out, as eBay’s filing did not include any data on how many eBay sellers lit off for the Amazon Marketplace territories, nor does it make any specific claims about how much revenue they believe Amazon cost them. The specifics may come out in court, assuming the case makes it through summary judgement and actually ends up in a courtroom.
This is not the first case of its kind in the high-stakes world of eCommerce and mobile commerce competition. In 2014, Uber was accused of attempting to sabotage Lyft by having Uber employees use burner phones to book and cancel Lyft rides to mess with their drivers. They would then book Uber employees into Lyft cabs to talk up how great it is to work for Uber.
And, in fact, Amazon has in the past been accused of even sharper-elbowed tactics against rivals. One month after Etsy's flubbed IPO in April 2015, Amazon started directly contacting the platform’s top sellers, asking if they were interested in selling on its upcoming Handmade platform.
“We’re offering artisans like you a first peek at Handmade, a new marketplace for handcrafted goods,” the emails reportedly stated. And it was successful: Six months later, Amazon Handmade was up and running, and a month after that Etsy shares were down 14 percent.
The team at eBay can’t show quite as direct a series of hits as the Etsy team, but minimally they can show that Amazon employees were in violation of the terms of service for selling on eBay. Whether that will be enough to convince a judge they are entitled to damages remains to be seen.
So is it a sizzle or a fizzle? Hard to say, and depends on perspective. Some might say that given eBay’s market cap of $33 billion, compared to Amazon’s $887 billion, it might be a tad aggressive.
But then again, Amazon didn’t force eBay’s sellers to anything they didn’t want to do, and many sellers sell on various marketplaces anyway. In the case of Amazon, for sellers to pursue an opportunity on a larger marketplace could be interpreted as sour grapes for a competitor that has been around for approximately the same amount of time but is a fraction of its size.
Perhaps it is not for us to say.
And, actually, we won’t have to. At this point, a judge will do it for us. Well keep you posted on who ended up sizzling – and fizzing – in this encounter.
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