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eBay is suing Amazon over an alleged “scheme” to steal its top sellers

The lawsuit says Amazon caused “irreparable injury” that can’t be fixed with money. (But eBay does still want money.)

General Views of eBay Headquarters Stuart C. Wilson/Getty Images

EBay filed a lawsuit against Amazon in Santa Clara County, California, on Wednesday, accusing the company of orchestrating a scheme to steal its biggest sellers.

The word “scheme” appears in the 18-page court filing 23 times. Essentially, eBay alleges, after an internal investigation kicked off because of a tip from an eBay seller, Amazon instructed employees to create fake eBay accounts and reach out to eBay sellers, using eBay’s messaging system, asking them if they’d like to sell on Amazon.

The company’s current market cap is around $33 billion, while Amazon’s is about $887 billion. It’s not really a story of David versus Goliath, but it could be called, I guess, a story of Goliath versus … the force of gravity? Lawyers from eBay quote, in the introduction to their argument, a January CNN article that referred to Amazon as “an 800-pound gorilla with a hand grenade.” They don’t really explain the metaphor, but it does enough work imagery-wise.

The suit points out that 2017 was the first year in which more than half of products sold on Amazon were listed by third-party sellers, in a mimicry of eBay’s longtime business model. It basically frames Amazon as an insatiable giant, under constant pressure from shareholders and CEO Jeff Bezos to come up with ideas for attracting more and more sellers to its ever-expanding platform. In this case, eBay’s lawyers argue, it’s not just competition — it’s also corporate sabotage.

Some Amazon employees allegedly created multiple eBay accounts with this aim, using them to send dozens of introductory messages like, as excerpted in the suit:

“I am part of what you would call a hunter/recruiter team which actively searches for sellers we believe can do well on the platform”; “I work for Amazon and we are trying t0 recruit a couple sellers”; and “I work for a small team here at Amazon that recruits a finite number of high-potential sellers.”

This, eBay argues, is in violation of its user agreement, which states: “We encourage open communication between our members but we don’t allow our members to use these options to send spam, offers to buy or sell off eBay, threats, profanity, or hate speech.”

The company is demanding, from Amazon, “monetary relief” to cover damages, as well as restitution of Amazon’s “unlawful proceeds” (which requires a look at Amazon’s sales and revenue records for all of the sellers it allegedly poached), punitive damages “as may be awarded at trial,” attorney’s fees, and interest on all of that.

The filing also emphasizes that eBay has sustained wounds at Amazon’s hand that it feels even money cannot heal: “eBay has suffered irreparable harm as a result of Amazon’s activities and will continue to suffer irreparable injury that cannot be adequately remedied at law.” (Does Amazon’s strategy really demand language on par with a monologue from The Crucible? Probably not, but that’s why, today, I am grateful to eBay’s lawyers. Keeping things lively is an underappreciated craft.)

The lawsuit claims that around 50 Amazon employees were sending messages to eBay sellers, asking them if they’d be interested in also selling on Amazon. If it’s true, would this be a violation of eBay’s terms of service? Yes. Would it be rude, and honestly kind of petty? Yes.

Is it likely that this alleged behavior materially affected eBay’s business? The filing does not draw any connections showing sellers actually left eBay for Amazon or make any claims about how much revenue Amazon’s scheme may have cost them, so there’s no way for us to know until specifics come out in court. (Assuming we get that far.)

When you’re dealing with buckets of Silicon Valley venture capital and “move fast break things” startup culture, you often get into drama of this sort. For example: In 2014, Uber was accused of orchestrating an elaborate plan to sabotage Lyft, giving “brand ambassadors” burner phones and credit cards to use to order and then cancel Lyft rides and mess up their hail times, or to actually take a ride in a Lyft and then talk up a switch to Uber with the driver.

As reported by The Verge, internal documents and interviews with former employees corroborated the claim that Uber was paying up a $750 commission for successfully poaching a Lyft driver. (It was called Operation Slog!)

And it’s not just happening recently: In 2000, Oracle hired private investigators to compile secret reports on Microsoft’s “public allies” in the academic community. In 1982, a man who went by “One-Eyed Jack” (One-Eyed Jack!) went to prison for six months for operating a crime ring that stole specialized computer chips from Intel and sold them to the company’s Japanese competitors, who scarcely bothered to keep their bidding discreet.

This purported messaging scheme doesn’t reach anything near that level of brazenness. And Amazon has been more publicly aggressive with other rivals: A month after Etsy’s disastrous IPO in 2015, the Wall Street Journal reported that Amazon had started emailing the platform’s top sellers, asking them if they were interested in selling on Amazon as well, even encouraging them to fill out a form detailing their business and sales history.

“We’re offering artisans like you a first peek at Handmade, a new marketplace for handcrafted goods,” the emails reportedly stated. This wasn’t even a secret; it didn’t need to come up in court. The new “handcrafted goods” section of the site launched that October, and when Amazon expanded Handmade with a designation gifts section the following year, it sent Etsy shares down 3 percent by the middle of the day.

Amazon perennially has it out for Etsy — currently valued around $5 billion, so, about a one-hundred-and-eightieth of Amazon’s value — and doesn’t bother to hide it. The implication is a rhetorical question: What’s Etsy really going to do to Amazon? EBay, if it so chose, could take the comparative sophistication of this particular alleged Amazon play as a tiny compliment.

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