A federal district court recently denied Amazon.com Inc. (Amazon)’s Motion to Dismiss a federal false advertising claim and state law claims of unfair competition and tortious interference that were filed against it by M-Edge Accessories LLC (M-Edge). M-Edge alleged that Amazon was liable for false advertising under the Lanham Act, due to its alleged diversion of customers from listings for third-party Kindle accessories to listings for its own competing products. M-Edge stated in the complaint that Amazon designated M-Edge’s products as “not currently available,” stated that Amazon had not approved M-Edge’s products, and displayed links to competing Kindle-related products.
M-Edge manufactures accessories for mobile electronic devices such as e-book readers and tablet computers. When Amazon began producing its highly successful Kindle e-book reader in 2008, M-Edge began producing a protective jacket for the e-reader and selling this accessory on the Amazon.com website. According to the complaint, Amazon executives routinely threatened M-Edge during contract negotiations in order to obtain ever-larger percentages of its sales of Kindle accessories. Such threats included de-listing the plaintiff’s products and denying M-Edge pre-launch access to new versions of the Kindle, which would deny M-Edge a competitive advantage by preventing it from offering its accessories immediately following the launch of a new Kindle version. In 2010, M-Edge refused to pay Amazon a portion of its proceeds from sales to other companies that obtained products directly from M-Edge and ultimately resold them to consumers. According to the complaint, Amazon allegedly responded by removing M-Edge from the preferred vendor program, discouraging M-Edge’s customers from dealing in M-Edge’s Kindle accessories, and continuing to display M-Edge’s products but labeling them as “not currently available” while providing links to Amazon’s competing products. Amazon also told its customers that Amazon had to approve Kindle accessories before they could but offered and that it had decided not to approve M-Edge’s products.
The district court found Amazon’s alleged statements that M-Edge’s products were “not currently available” and that Amazon must approve Kindle accessories were enough to support a federal claim for false advertising. The court concluded that the Amazon search results amount to “commercial speech,” reasoning, in part, that “(t)he purpose of the ‘not currently available’ statement could plausibly be viewed as being to cause the consumer to forego looking for a desired M-Edge product and, instead buy a competing product offered by Amazon” and that “(t)he purpose of the ‘Amazon approval’ statement could plausibly be viewed as being to cause the customer to decline to obtain and resell M-Edge products and, instead, to obtain and resell products produced by Amazon or by producers who pay Amazon a share of their sale proceeds.”
The district court also concluded that M-Edge’s claims for unfair competition and tortious interference could proceed. As to the former claim, the court ruled that M-Edge had alleged sufficient facts to present a plausible claim that Amazon used deceit, trickery, or unfair methods to unfairly compete with M-Edge, reasoning that “a reasonable consumer could be misled by Amazon’s stating that an M-Edge product was ‘not currently available’ together with an offer of a competing product to mean that the M-Edge product was not available from any source whatsoever.” As to the tortious interference claim, the court reasoned that Amazon’s alleged threats to contact M-Edge’s customers or de-list M-Edge’s products stated a plausible claim, given that the wrongful acts necessary to support a tortious interference claim include threats and intimidation.