Taylor et al v. Amazon.com Inc

Filing 33

ORDER ON MOTION TO DISMISS. The Court GRANTS Amazon's 13 Motion without prejudice. The Court GRANTS Plaintiffs leave to amend their Complaint within 30 days of this Order. Signed by Judge Marsha J. Pechman. (KRA)

Download PDF
1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 11 12 13 14 15 JEFFREY TAYLOR and ROBERT SELWAY, Plaintiffs, CASE NO. No. 2:24-cv-00169-MJP ORDER ON MOTION TO DISMISS v. AMAZON.COM, INC., Defendant. 16 17 This matter comes before the Court on Defendant’s Motion to Dismiss. (Dkt. No. 13.) 18 Having reviewed the Motion, Plaintiffs’ Opposition (Dkt. No. 20), the Reply (Dkt. No. 21), and 19 all supporting materials, the Court GRANTS the Motion and DISMISSES the Complaint with 20 leave to amend within 30 days of this Order. 21 BACKGROUND 22 Plaintiffs Jeffrey Taylor and Robert Selway claim the algorithm used by Defendant 23 Amazon.com., Inc. to determine which offers are prominently featured on the online marketplace 24 violates the Washington Consumer Protection Act, RCW § 19.86.010 (“CPA”). They claim that ORDER ON MOTION TO DISMISS - 1 1 the algorithm’s preference for Amazon’s own offers, or those offers for which Amazon provides 2 logistical support, deceives consumers into paying more for identical products. The Court 3 reviews the relevant facts. 4 Since 1994, Amazon has expanded from selling books to becoming the largest online 5 retailer in the United States. (Complaint ¶¶ 1, 20 (Dkt. No. 1).) It has done so via two avenues: 6 Amazon Retail and Amazon Marketplace. (Id. ¶ 2.) Amazon Retail is comprised of two parts: 7 goods produced by and sold through Amazon, such as Kindle e-readers and “Amazon Basics” 8 products, and through wholesale supplier partners, referred to as vendors. (Id. ¶¶ 21–23.) 9 Amazon Marketplace allows other retailers, referred to as “sellers,” to sell products directly to 10 consumers on Amazon’s retail platform, where they compete against Amazon Retail. (Id. ¶ 24.) 11 For the privilege of selling on Amazon Marketplace, sellers must pay Amazon fees, 12 including commissions, selling fees, advertising services, and any fees owed due to enrollment in 13 the Fulfilled By Amazon (“FBA”) program. (Compl. ¶ 25.) FBA allows sellers to contract out 14 certain logistical elements of online retail, such as warehousing, packing, shipping, and handling 15 of returns, to Amazon. (Id. ¶¶ 27–30.) By all accounts, most successful Amazon sellers use FBA, 16 which has become a multi-billion-dollar venture for Amazon. (Id. ¶¶ 26, 29.) 17 When customers search for an item on Amazon, they are presented with a “Detail Page” 18 including a product description, pictures, dimensions, reviews, and, importantly for the purposes 19 of this lawsuit, a “Featured Offer” or “Buy Box” winner. (Compl. ¶¶ 35–38.) When more than 20 one seller offers the same product, Amazon selects a single offer—either from Amazon Retail or 21 from a third-party seller—for display in the “Buy Box.” (Id. ¶ 39.) When an offer is selected for 22 display in (or “wins”) the Buy Box, that offer’s price is prominently displayed on the item page, 23 and shoppers may accept the offer immediately through a “Buy Now” button or may use a 24 ORDER ON MOTION TO DISMISS - 2 1 different button to add the offered item to their shopping cart. (Id. ¶ 40.) 2 3 4 5 6 7 8 9 10 11 12 13 (Compl. ¶ 40.) 14 When an offer does not win the Buy Box, it is relegated to the “Other Sellers on 15 Amazon” section, which lists the lowest price among the relegated offers and cannot be bought 16 directly via a “Buy Now” button. (Compl. ¶¶ 42–43.) Unsurprisingly, some reports allege that up 17 to 98% of purchases made on Amazon Marketplace are made via the Buy Box. (Id. ¶¶ 41, 44.) 18 A. 19 Allegations of Buy Box Deception Plaintiffs allege that the Buy Box algorithm, or the methodology by which offers are 20 selected to win the Buy Box, are rigged in favor of Amazon Retail offers or offers from sellers 21 enrolled in FBA. (Compl. ¶ 50.) Plaintiffs rely on a 2021 report from the Italian Competition 22 Authorities, which found that the Buy Box algorithm looks at five factors when determining 23 which offer should win the Buy Box. (Id. ¶ 51). Plaintiffs allege that two of the five factors are 24 biased in favor of Amazon Retail or FBA offers. (Id.) The first factor is whether an offer ORDER ON MOTION TO DISMISS - 3 1 qualifies for Amazon Prime, a consumer subscription service that allows for free two-day 2 shipping. (Id. ¶¶ 32–34, 52.) Plaintiffs allege that FBA offers automatically qualify for Amazon 3 Prime, while non-FBA offers do not. (Id. ¶ 52.) The second factor is the seller performance 4 rating, which Plaintiffs allege does not apply to FBA offers, as those offers automatically receive 5 the “maximum value[] simply by virtue of being FBA offers.” (Id. ¶ 53.) 6 Plaintiffs filed their Complaint on February 8, 2024, alleging that Amazon’s use of the 7 Buy Box algorithm constitutes a deceptive practice under the CPA. (Dkt. No. 1.) They claim that 8 the biases in Amazon’s Buy Box algorithm “deceptively preference[] offers from Amazon itself 9 and third parties that participate in FBA, even when there are lower prices on otherwise identical 10 offers from sellers that don’t use FBA.” (Compl. ¶ 55.) According to Plaintiffs, this deception 11 injured them and other members of a putative class by causing them to pay more for goods via 12 offers that won the Buy Box than they would have paid if Amazon did not use the biased 13 algorithm. (Id. ¶¶ 84–86.) They further note that this deception only came to light upon 14 investigation by European regulators in 2021–2022 (which is within the statute of limitations for 15 the single cause of action under the CPA). (Id. ¶¶ 59–69.) Plaintiffs do not identify any specific 16 purchase they would have made if not for Amazon’s alleged deceptive practices, nor do they 17 identify any lower-priced items that they could have bought from other sellers. 18 Amazon moves to dismiss the Complaint, (Dkt. No. 13), specifically arguing that (1) 19 Plaintiffs’ CPA claim is time-barred by the statute of limitations, and (2) Plaintiffs fail to allege 20 necessary elements of their CPA claim. 21 22 23 24 ORDER ON MOTION TO DISMISS - 4 ANALYSIS 1 2 A. 3 Legal Standard Under Fed. R. Civ. P. 12(b)(6), the Court may dismiss a complaint for “failure to state a 4 claim upon which relief can be granted.” In ruling on a motion to dismiss, the Court must 5 construe the complaint in the light most favorable to the non-moving party and accept all well 6 pleaded allegations of material fact as true. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 7 416 F.3d 940, 946 (9th Cir. 2005); Wyler Summit P’ship v. Turner Broad. Sys., 135 F.3d 658, 8 661 (9th Cir. 1998). Dismissal is appropriate only where a complaint fails to allege “enough facts 9 to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 10 570 (2007). A claim is plausible on its face “when the plaintiff pleads factual content that allows 11 the court to draw the reasonable inference that the defendant is liable for the misconduct 12 alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).  The plaintiff must provide “more than 13 labels and conclusions, and a formulaic recitation of the elements of a cause of action will not 14 do.” Twombly, 550 U.S. at 555. 15 B. 16 Application of the Discovery Rule to Plaintiffs’ CPA Claim Amazon first seeks dismissal on timeliness grounds, arguing that Plaintiffs’ CPA claim 17 falls outside of the four-year statute of limitations because Plaintiffs should have known of their 18 injuries by 2018. The Court disagrees. 19 CPA claims are subject to a four-year statute of limitations, RCW 19.86.130, which 20 “begin to run ‘when a party has the right to apply to a court for relief,’ or, alternatively, ‘when 21 the plaintiff, through the exercise of due diligence, knew or should have known the basis for the 22 cause of action.’” Pearse v. First Horizon Home Loan Corp., 742 F. App’x 167, 169 (9th Cir. 23 2018) (quoting Shepard v. Holmes, 185 Wn. App. 730, 739 (2014)). When a party should have 24 ORDER ON MOTION TO DISMISS - 5 1 discovered a cause of action is “ordinarily a question of fact.” Green v. Am. Pharm. Co., 136 2 Wn.2d 87, 100 (1998). 3 The Complaint adequately alleges that Plaintiffs became aware of the basis for their 4 cause of action in 2021, after European regulators issued findings regarding Amazon’s alleged 5 bias in the selection of the Buy Box offer, making the filing of the Complaint timely. As an 6 initial matter, the Complaint alleges that the claims are not time-bound under the “discovery 7 rule,” because Plaintiffs could not have reasonably discovered the alleged deceptive conduct 8 until a 2021 regulatory investigation by European regulators. (Compl. ¶¶ 59–69.) The Complaint 9 acknowledges that “isolated reports in the press[] suggesting that Amazon appear[s] to favor 10 FBA sellers in the selection of the Buy Box winner,” but claims that because those “reports did 11 not involve an investigation of Amazon’s algorithm or other internal documents,” they were “not 12 of the nature and kind that would have spurred reasonable consumers” to know the basis of a 13 CPA claim. (Id. ¶ 67.) The Complaint was therefore timely filed. 14 The Court disagrees with Amazon’s argument that Plaintiffs could have discovered the 15 basis of their claims through on two separate sources of public information from 2018 and 2019. 16 The Court reviews both sources. First, Amazon represents that Plaintiffs were aware of three 17 online articles from 2018 and 2019. The first article, How Amazon Rigs Its Shopping Algorithm, 18 is cited numerous times in the Complaint. (Compl. ¶¶ 2 n.2, 18 n.45–46, 19 n. 48.) The two 19 remaining articles, 7 Steps to Winning the Amazon Buy Box in 2019 and Why You Need the 20 Amazon Buy Box—And How to Get It, are not cited in the Complaint, but do appear in a 21 separate class complaint filed by Plaintiffs’ attorneys against Amazon. (Mot. at 13.) Amazon 22 faults Plaintiffs for failing to offer a “reason” why they “could not have learned through 23 reasonable diligence the same facts” relied upon in the separate class complaint. (Reply at 6.) 24 ORDER ON MOTION TO DISMISS - 6 1 But the separate class complaint was filed in March 2020, which is within the statute of 2 limitations at issue here. See Frame-Wilson v. Amazon.com, Inc., No. 2:20-cv-00424-JHC, 3 Complaint, Dkt. No. 1 (W.D. Wash. Mar. 19, 2020). 4 Second, Amazon points to its own testimony in front of a congressional subcommittee on 5 October 11, 2019, as evidence that it publicly disclosed what factors other than item price it used 6 when selecting which offer was to be featured in the Buy Box. (Mot. at 8–9.) Plaintiffs note that 7 the testimony provided in that hearing contradicted itself. (Compl. ¶ 60.) 8 9 Neither source proffered by Amazon is sufficient to demonstrate that Plaintiffs should have been aware of their claims prior to 2020. Plaintiffs rely on Avila v. Willits Environmental 10 Remediation Trust, 633 F.3d 828 (9th Cir. 2011), for the proposition that “some public 11 awareness of an issue through media coverage does not in and of itself trigger the discovery 12 rule.” (Opp. at 12.) The Court finds the reasoning in Avila persuasive. In Avila, the trial court 13 granted summary judgment against toxic tort claimants on statute of limitations grounds. The 14 Ninth Circuit vacated that decision, finding that “[p]ublicity concerning the [toxic] 15 contamination and that it was likely the source of that injury must have been so pervasive as of 16 that date that the only reasonable inference is that Plaintiffs should have known the cause of their 17 injury.” Id. at 842 (emphasis in original). The court noted that while there was some equivocal 18 information regarding the contamination and legal issues surrounding the [toxic] site, “very little 19 information indicated” that it could be the cause of the alleged injuries. Id. Like Avila, there was 20 very little information before February 2020 that would have alerted Plaintiffs to the alleged 21 injury. Two of the blog posts referred to by Amazon are written for a niche audience of Amazon 22 sellers; the third discusses the antitrust and competition considerations of the Buy Box, but 23 ultimately focuses on policy solutions. And, like the equivocal reports in Avila, the congressional 24 ORDER ON MOTION TO DISMISS - 7 1 testimony contradicts itself by providing both “anecdotal evidence” from an Amazon seller 2 alongside testimony from Amazon itself claiming that “the same criteria [applies to Buy Box 3 selection] whether [the seller] is a third-party seller or Amazon.” (Compl. ¶ 60.) 4 The Court therefore rejects Amazon’s challenge to Plaintiffs’ claims as untimely. The 5 Complaint includes well-pleaded allegations that Plaintiffs could not have reasonably learned of 6 their alleged injuries until the regulatory findings in 2020 and 2021, and what evidence Amazon 7 has produced to the contrary does not show otherwise. 8 C. Plaintiffs’ CPA Claim 9 The Court agrees with Amazon that the Complaint fails to adequately allege the fourth 10 (injury) and fifth (causation) elements required of Plaintiffs’ CPA claim. The Complaint lacks 11 specific factual allegations necessary to draw a reasonable inference that Plaintiffs sustained a 12 cognizable injury under the CPA or that Amazon caused the injury. Because dismissal is 13 warranted on the fourth and fifth elements of Plaintiffs’ CPA claim, the Court does not address 14 Amazon’s challenge to the first CPA element (unfair or deceptive act) at this time. 15 “To prevail in a private CPA claim, the plaintiff must prove (1) an unfair or deceptive act 16 or practice, (2) occurring in trade or commerce, (3) affecting the public interest, (4) injury to a 17 person's business or property, and (5) causation.” Panag v. Farmers Ins. Co. of Wash., 166 18 Wn.2d 27, 37 (2009) (citing Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 19 Wn.2d 778, 784 (1986)). “The CPA is to be ‘liberally construed that its beneficial purposes may 20 be served.’” Panag, 166 Wn.2d at 37 (quoting RCW 19.86.920). “Failure to satisfy even one of 21 the elements is fatal to a CPA claim.” Sorrell v. Eagle Healthcare, Inc., 110 Wn. App. 290, 298 22 (2002) (citing Hangman Ridge, 105 Wn.2d at 793). 23 24 ORDER ON MOTION TO DISMISS - 8 1 1. Plaintiffs fail to adequately allege injury. 2 Plaintiffs fail to show that they were “injured in his or her business or property.” RCW 3 19.86.090. The Complaint only contains a threadbare allegation that the Plaintiffs “suffered an 4 injury in fact,” due to Amazon’s alleged conduct. (Compl. ¶ 86.) Outside of that recitation, the 5 Complaint is devoid of the type of “factual content that allows the court to draw the reasonable 6 inference that the defendant is liable for the misconduct alleged.” Iqbal, 445 U.S. at 678, see also 7 Cousineau v. Microsoft Corp., 992 F. Supp. 2d 1116, 1128 (W.D. Wash. 2012) (“In the absence 8 of more specific facts demonstrating that [plaintiff] or members of the purported class actually 9 sustained injury, [plaintiff’s] claim under the CPA must fail.”). Plaintiffs make no such 10 allegation that they suffered an actual, specific injury, which is fatal to their CPA claim. 11 Plaintiffs have not adequately shown that they made any specific transaction with Amazon, let 12 alone one from the Buy Box. Plaintiffs provide no information regarding specific orders (i.e., 13 receipts), nor make allegations regarding discrete transactions with Amazon. And without a 14 showing of a specific transaction, Plaintiffs cannot possibly allege that they themselves were 15 overcharged for any particular purchase – which is the injury in dispute. (See Opp. at 23) 16 (“Plaintiffs’ theory of harm is . . . that they overpaid for products purchased from the Buy 17 Box.”). 18 Plaintiffs claim that they are entitled to a “reasonable inference of injury” based on their 19 allegations that they have been Amazon customers for the eight years during which Amazon has 20 “routinely overcharged consumers at the Buy Box.” (Opp. at 23.) But Washington law requires 21 Plaintiffs to allege a “specific injury, reputational or otherwise, that has actually occurred” due to 22 Amazon’s conduct, not a “mere possibility of injury.” Universal Life Church Monastery 23 Storehouse v. King, No. 2:19-CV-00301-RSL, 2019 WL 2524993, at *3 (W.D. Wash. June 19, 24 ORDER ON MOTION TO DISMISS - 9 1 2019) (dismissing CPA claims on injury and causation grounds). The sole case relied upon by 2 Plaintiffs to support their reasonable inference theory, Nemykina v. Old Navy, LLC, 461 F. 3 Supp. 3d 1054, 1060–61 (W.D. Wash. 2020), is unavailing. In Nemykina, the court found that 4 the plaintiff’s allegations, including that “items she purchased were not in fact worth the list[ed] 5 prices,” plainly alleged a specific harm under the CPA. Id. (emphasis added). In addition, the 6 Court notes that the Nemykina complaint includes screenshots of specific purchases purportedly 7 made in reliance of those advertisements. (See First Amended Class Action Complaint at Ex. A, 8 Nemykina v. Old Navy, LLC, No. 2:19-cv-01958-BJR (W.D. Wash. Jan. 5, 2020), ECF. No 14.). 9 Plaintiffs do not allege any specific purchases in which they were deceived via the Buy Box, let 10 11 alone provide receipts. The Court recognizes that Plaintiffs may be unable to ultimately prove that they overpaid 12 for specific purchases: in Plaintiffs’ lone example of a Buy Box screen, (see Compl. ¶ 40), the 13 Featured Offer price of $11.37 for hand soap is significantly lower than the lowest priced offer— 14 $14.05—listed from other sellers. But the CPA claim cannot proceed past the pleading stage 15 without a specific allegation of injury. Given the lack of injury, the Court GRANTS Amazon’s 16 Motion to Dismiss. 17 2. Plaintiffs fail to adequately allege causation. 18 Plaintiffs also fail to allege specific facts related to causation. Proximate cause is a 19 required element of a CPA claim. See Hangman Ridge, 105 Wn.2d at 793 (“A causal link is 20 required between the unfair or deceptive acts and the injury suffered by plaintiff.”). The 21 Complaint contains just one allegation causation allegation: “But for Amazon’s deceptive 22 conduct concerning the Buy Box algorithm, Plaintiffs and members of the Class would have 23 purchased the lower priced offers from non-FBA sellers with equivalent or better delivery 24 ORDER ON MOTION TO DISMISS - 10 1 times.” (Compl. ¶ 88.) The Court agrees with Amazon that this naked recitation of proximate 2 cause falls short of the Rule 12(b)(6) standard. See Twombly, 550 U.S. at 555 (“a formulaic 3 recitation of the elements of a cause of action will not do.”). This is particularly true because 4 without an adequate allegation of a specific injury—a purchase and a lower-cost option— 5 Plaintiffs fail to show causation under the CPA. In other words, Plaintiffs have not alleged that 6 without Amazon’s alleged deceptive or unfair practices “injury complained of . . . would not 7 have happened” Schnall v. AT&T Wireless Servs., Inc., 171 Wn. 2d 260, 278 (2011) (quoting 8 Indoor Billboard/Washington, Inc. v. Integra Telecom of Washington, Inc., 162 Wn. 2d 59, 82 9 (2007)). Finding no alleged injury, see supra § C.1, the Court finds that Plaintiffs have not shown 10 causation. For this additional reason, the Court GRANTS Amazon’s motion to dismiss. CONCLUSION 11 12 The Complaint includes well-pleaded allegations that Plaintiffs could not have reasonably 13 learned of their cause of action until regulatory findings issued in 2020 and 2021. Despite blog 14 posts and a congressional subcommittee record discussing the Buy Box, the Court finds that 15 Plaintiffs’ CPA claim is not barred by the statute of limitations. But, even construing the 16 Complaint in Plaintiffs’ favor, the Court finds that Plaintiffs failed to adequately allege specific 17 injury or causation as part of their CPA claim. Therefore the Court GRANTS Amazon’s Motion 18 without prejudice. The Court GRANTS Plaintiffs leave to amend their Complaint within 30 days 19 of this Order. 20 The clerk is ordered to provide copies of this order to all counsel. 21 Dated July 8, 2024. 22 23 A Marsha J. Pechman United States Senior District Judge 24 ORDER ON MOTION TO DISMISS - 11

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?