[Seattle Times] In Seattle e-commerce clash, defunct retailer Zulily sues rival Amazon

https://www.seattletimes.com/business/online-retailer-zulily-sues-rival-amazon/

By

Lauren Rosenblatt

Seattle Times Amazon reporter

Zulily, the Seattle-based online retailer that recently announced it is going out of business, has sued its one-time rival Amazon.

In a complaint filed Monday in Seattle, Zulily accused the e-commerce giant of using the same anticompetitive business practices that at the center of the Federal Trade Commission’s antitrust lawsuit against Amazon earlier this year.

In that case, the FTC accused Amazon of preventing rival retailers from gaining a foothold in the industry through several tactics, including punishing third-party merchants who sold their goods for a lower price on platforms other than on Amazon.com. Amazon disputes those allegations, maintaining that it uses the same tools to highlight low prices on its website as other retailers.

In its complaint, Zulily said Amazon did punish the sellers who used both digital platforms, leading those merchants to raise their prices on Zulily’s website, take products off of Zulily or stop selling on Zulily altogether. In some cases, the sellers never contacted Zulily, the company alleged.

In the span of one year, Zulily lost half of its sellers, according to the complaint.

Just a few months after Amazon began focusing on the burgeoning startup in 2019, Zulily said the conduct forced it to change its business strategy, abandoning its “Best Price Promise” and a price comparison tool that it hoped would offer consumers discounts. That led to decreased revenue and consumer traffic to the site.

Launched in 2010 by two former executives with online jewelry retailer Blue Nile, Zulily dazzled the tech world with a multi billion-dollar IPO in 2013. The next year, it was doing $1 billion in annual sales and had a market valuation around $7 billion.

But it couldn’t sustain its early growth and went through rounds of job cuts, moved its headquarters and changed ownership. In May, Los Angeles-based private equity firm Regent bought Zulily for an undisclosed sum.

The company said Saturday it was going out of business, less than 48 hours after it laid off more than 800 employees, including 292 in the Seattle area.

“The plot against Zulily was part of Amazon’s overall scheme,” attorneys for Zulily wrote in the complaint.

That scheme, the attorneys continued, would eliminate price competition among online retailers, make Amazon appear to be the best price option and “groom consumers not to look anywhere besides Amazon.”

Amazon has maintained that its business practices are not anti-competitive and that the very practices the FTC is targeting actually lead to lower prices for consumers. David Zapolsky, Amazon’s general counsel and senior vice president for public policy, said Amazon strives to match other retailers’ low prices and allows third-party merchants who use its platform to set their own rates.

“Just like any store owner who wouldn’t want to promote a bad deal to their customers, we don’t highlight or promote offers that are not competitively priced,” Zapolsky wrote. “It’s part of our commitment to featuring low prices to earn and maintain customer trust.”

On Friday, Amazon filed a motion to dismiss the FTC’s case in a Seattle district court.

This story will be updated.

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Yep, none of us can actually argue, this is basically price fixing.

I never shopped Zulily, but its digital ads were everywhere. And I didn’t realize it was shuttering.

The brand had been losing ground before it last changed hands [in May 2023]. Zulily’s 2022 revenues tumbled 38% to $906 million – falling below $1 billion for the first time in several years. It reported an operating loss of $469 million compared to an operating loss of $539 million in 2021.

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I believe Amazon filed a motion to dismiss that FTC case yesterday or Friday.

It’s going to take a very special jury to convict their favorite website.

I see that case going nowhere and I’m not sure that would be fundamentally wrong.

Business is like life - survival of the fittest. Amazon has invested $750B in the last decade to be the best at what they do, and they are.

Is Amazon a horrible company? YES
Do they treat their employees like :poop:? YES
Do they treat their sellers like :poop:? YES
Do they favor overseas sellers? Sure seems like it and that might be illegal
Are their various policies at question here illegal? I’m not so sure.
If they weren’t the size they are - would anyone care? Nope…
Do I like Amazon and enjoy selling on their marketplace? HELL NO!
Am I Pro Business / Big Business? HELL YES

Some of this might be unpopular but figured I would share my thoughts like I always do around here. :rofl:

Might I be wrong with any of the above? Yup… It happens.

It seems you’re missing a reference to HELL BOY … what’s up with dat ?

See this is where a jury might differ. Big business vs small business is I think how the FTC will frame this case.

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Totally get it and totally agree. It’s complicated…

Just because you are big, doesn’t necessarily make what you did to get there wrong or illegal.

Amazon certainly plays in LOTS of “grey” areas of the law.

Let’s see what happens… :wink:

Amazon is the OG Black Hat. :rofl:

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I think it’s the general unknown that all of us as sellers would like to be gone. Not knowing if a policy will be enforced and/or how. Not knowing is amazon will follow its own policies. Etc.

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You just opened up a gigantic can of worms right there. I would love to sit here and write one of my books but alas… Got stuff to do.

LOL

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I so vaguely remember zulily being huge when it first came out. If I remember right they offered limited time deals. What I remember hating is that it was just limited time only things. So if you didn’t have the cash right then and there good luck.

I’m really fascinated I suppose about this lawsuit because I really don’t think it’s Amazons “fault” they went out of business. I think a lot of sellers would find Amazon a more favorable marketplace because it’s not “limited”. I honestly think a lot of sellers “quit selling” on zulily because it seems like a quick 72 hour sale is more about building brand awareness than long term profitability especially if your not selling on Zulily 24/7. Having someone say “hey that’s a cool xyz you got where can I buy one” doesn’t bode well for someone to be like “oh I bought it on zulily but good luck they don’t sell it anymore and I have no idea where to get it”. The takeaway from that is “hey I might get a great deal on something I don’t know I want or need on zulily, but when it comes to finding something I do need it won’t be there”

I think at that point then you transition from “selling on zulily to build awareness” into “selling leftover overstock on zulily as a last ditch attempt to get some $$”.

And of course now it’s a whole different playing field 10 years later where you don’t have so many big brand vendors but now “everyone and their mom” is a vendor because it’s so easy now for anyone to import anything to build a business on Amazon. Why try to procure 50,000 units to try and sell on zulily when you can just procure 50 units to sell on Amazon.

So I’m going to be curious how this plays out in blaming amazon. I think this is just free market doing its thing. I know Amazon years ago said you had to keep prices the same on other marketplaces but I think they walked that back a few years ago. I remember people wanting to raise their prices because of the fee differences between Amazon Handmade and Etsy.

Also, now that I think about it…I would think Etsy would want a piece of this lawsuit and would have the $$$ to put towards it if they thought it was viable.

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Zulily is named extensively in the FTC complaint as being specifically and intentionally targeted by Amazon.

Zulily specifically cites the FTC complaint, investigation, and findings in their complaint.

I searched the FTC pdf but did not see Etsy.
I did see Walmart.
There are many redactions.

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That’s interesting.

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My eldest daughter, now 54yo, used to buy from Zulily when Zulily had styles which were unique to Zulilly.

Haven’t heard the name for years. If they were hosting Amazon sellers, they lost their edge and were going to fail.

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Amazon has no legal basis for demanding that any item sold on Amazon be sold at (or below) the price listed elsewhere. Their “enforcement” of this policy against sellers is simple extortion.

The FTC will impose the law on Amazon, at least this once.

They’re not demanding that the item be sold at a certain price, they’re just giving that offer less visibility and removing the buy box to signal to consumers that the offer is a bad deal (which it is). Or in some cases they don’t allow the listing.

Sellers don’t have the right to have their offer featured, or to have a buy box on their listing. Amazon determines how a listing ranks and whether to award a buy box or not, and whether or not a listing is allowed or not.

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Your somewhat correct, but they are penalizing sellers for having a lower price elsewhere. It’s going to come down to a jury’s opinion of if the strong arm tactic of removing the buy box and suppressing search results for said item to, ahem, encourage a lower price is legal or not

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They are absolutely coercing sellers to lower their price. But sellers agreed to that treatment by agreeing to the business solutions agreement. Everyone who agreed to, and continues to agree to the BSA does so voluntarily.

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I would challenge you to find exactly where in the BSA it states that.

I am a BIG proponent (back in the OSFE days) of saying, “But you agreed to that” when sellers would cry about something, but in this case, no seller agreed to that.

Also, even if you “agreed” to something, it is non-enforceable if what was agreed to is illegal.

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If they determine your product or listing shouldn’t be made available, that’s their right to do so.

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That’s a stretch RE the FTC’s case. But I’m not a juror on the case, so who knows!

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