EBay Is Suing Amazon. Here's Why

EBay Inc. (EBAY) filed a lawsuit against Amazon.com Inc. (AMZN) Wednesday, accusing its e-commerce rival of illegally poaching its sellers.

In the lawsuit, filed in Santa Clara County in California, eBay said Amazon representatives created eBay accounts and then messaged sellers via the company’s internal email system in an effort to persuade them to start selling their goods on Amazon.

EBay claimed that dozens of Amazon sales representatives in both the U.S. and abroad were involved in the illegal recruitment drive, adding that hundreds of emails have been sent since 2015.

EBay alleged that these actions violated its user agreement and formed part of a strategy that was orchestrated from Amazon’s headquarters.

"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," eBay said in its lawsuit.

In order to avoid detection, Amazon representatives allegedly spelled out their email addresses and asked eBay sellers to talk on the phone. EBay said it was eventually alerted to the issue by one of its sellers a few weeks ago. When it discovered that the complaint was true, it sent a cease and desist letter to Amazon ordering the company to stop.

An Amazon spokesperson said the company is “conducting a thorough investigation of these allegations."

Amazon Could Be Hit With More Than Fines

EBay has demanded that Amazon stops misusing its messaging platform and pays it an undisclosed amount of monetary damages. If a jury finds Amazon guilty of violating the California Comprehensive Computer Data Access and Fraud Act, the online retail giant could also be hit with restrictions on how it operates.

Both Amazon and eBay rely on third-party sellers and their commissions. All of eBay's retail sales are made by independent sellers and Amazon, too, is increasingly relying on them to grow its business. Last year, for the first time, more than half the items sold on Amazon’s website were from third-party sellers. Last year, Amazon also offered discounts on items sold by third-party sellers and reimbursed independent merchants the amounts it cost them.  

Amazon shares fell 0.37% in pre-market trading, broadly in line with the rest of the market.

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