Amazon facing £900m payout to shoppers over online ‘manipulation’

Home delivery of groceries from Whole Food Market

Millions of Amazon customers could receive a share of £900 million in compensation after the launch of a legal claim against the internet retailer for “abusing its dominant position”.

A consumer rights campaigner has teamed up with a top legal firm to allege that Amazon breached competition law and caused millions of UK shoppers to pay more than necessary by obscuring better online deals.

Amazon is an online retailer and a marketplace where tens of thousands of smaller retailers compete to sell goods. The legal action, to be filed in the Competition Appeal Tribunal in London, will claim that the American tech giant conceals offers by these third-party retailers in favour of products it sells itself.

The claim alleges that Amazon channels shoppers towards its “featured offer” box and the retailer uses a “secretive and self-favouring algorithm” to ensure this box nearly always includes goods sold directly by itself or by third-party retailers who pay “hefty” storage and delivery fees to the company.

Julie Hunter, a consumer advocate who is bringing the claim, said Amazon’s “Buy Box” prevents consumers from navigating the website for cheaper offers. She alleges this “manipulation” breaches Amazon’s obligation as the dominant marketplace not to distort competition. She said Amazon “uses tricks of design to manipulate consumer choice and direct customers towards the featured offer in its Buy Box”.

Hunter, who is a member of the Financial Services Consumer Panel, an independent statutory body, added: “Online shoppers have a right to be treated fairly and to be able to make informed decisions. This lack of transparency and manipulation of choice is an abuse of consumers’ trust, as well as a raid on their wallets.

“Amazon shouldn’t be allowed to set the rules in its favour and treat consumers unfairly. That is why I am bringing this action.”

The legal claim takes advantage of new rules that allow an “opt-out collective action” against companies where an individual can make a claim on behalf of millions of others without their explicit consent.

The claim is financed by a litigation fund that raises cash from investors to take on companies in the hope of taking a share of any proceeds. The claim is seeking damages of about £900 million.

If the claim does win, customers who have shopped at Amazon since 2016 will be able to apply for a share after the fund has taken its cut. Assuming the fund takes a quarter and ten million people could prove they have shopped at Amazon in the past six years, each could be eligible for £67 compensation. Amazon was approached for comment.

Lesley Hannah, a partner at Hausfeld & Co LLP, which is leading the litigation, said: “Most consumers use the ‘Buy Box’ when purchasing products on Amazon — estimates range from 82 per cent to 90 per cent. This means that millions of consumers have paid too much and been denied choice. This action seeks fair redress for them.”

Amazon have replied to the action with an official statement: “This claim is without merit and we’re confident that will become clear through the legal process. Amazon has always focused on supporting the 85,000 businesses that sell their products on our UK store, and more than half of all physical product sales on our UK store are from independent selling partners. We always work to feature offers that provide customers with low prices and fast delivery.”