Amazon Hit With Securities Fraud Class Action Over Big Data Usage and Costly Warehouse Expansion

According to a shareholder complaint filed in federal court in Seattle, Wash., Amazon and several of its executives including founder and executive chairman Jeff Bezos, have violated federal securities laws by misleading the investing public about the anticompetitive conduct fueling its “AmazonBasics” business as well as its “overly aggressive” expansion of warehouse and fulfillment centers that exposed it to billions in costs.

Tuesday’s lawsuit, brought by CWA Local 1180 Security Benefits Fund, a New York-based labor union, seeks to certify a class of investors who acquired Amazon common stock between Feb.1, 2019 and Apr. 28, 2022 at artificially high prices and have been or will be damaged by the company’s allegedly fraudulent conduct.

The complaint explains that Amazon is a big data company essentially masquerading as an e-commerce retailer. To this end, it describes AmazonBasics as the company’s private label, a collection of replicas of the most popular third-party merchandise sold on its website based on Amazon’s amalgamation and analysis of massive amounts of data.

The shareholder points to an investigation launched by the Securities and Exchange Commission (SEC), and before that legislative probes, regarding Amazon’s “use of third-party seller data for its own private-label business.” When news of the SEC’s investigation became public, Amazon’s stock reportedly fell 2% from $161.65 to  $158.76 on April 6.

The complaint’s second line of accusation concerns Amazon’s alleged spending spree on its warehouse, fulfillment, and data center space beginning in 2020 and continuing through the class period. Its massive expansion bid to double the size of its physical presence resulted in both an excess of space and employees that allegedly forced it into “cost efficiency” mode, halting further expansion and canceling some planned development projects.

The shareholder says that in late April, Amazon posted its first quarterly loss in seven years, in part reflecting the $2 billion in “incremental costs” the company incurred as a result of its building spree. On this news, Amazon’s stock tumbled 14.05% from $144.59 per share, to $124.28 per share on close on April 29.

The complaint says that during the class period, the defendants made false and misleading statements or omitted to disclose that “(i) Amazon engaged in anticompetitive conduct; (ii) Amazon’s anticompetitive behavior exposes it to a heightened risk of regulatory scrutiny; (iii) Amazon’s revenues derived from its AmazonBasics business were a result of its anticompetitive conduct; and (iv) Amazon was engaged in an overly aggressive expansion of its warehouse and fulfillment network that would expose it to billions in unnecessary ‘incremental costs.’” The shareholder, on behalf of the class, seeks damages and an award of its attorneys’ fees and costs.

The union is represented by Tousley Brain Stephens PLLC and Barrack, Rodos & Bacine.