Sezzle, the Minnesota-based BNPL platform, filed an antitrust lawsuit against Shopify, accusing it of monopolistic practices to limit competition for BNPL payment options on its platform.
The lawsuit claims Shopify “manipulated” potential Sezzle customers into using its own BNPL service, which is powered by Affirm, causing competitors to lose out on sales, and that Shopify “copied” Sezzle's BNPL product and business model by rolling out Shop Pay Installments.
Sezzle said in its lawsuit that in 2018 two senior Shopify executives visited the company “under the guise of ‘corporate development,’ and falsely suggested to Sezzle that Shopify was interested in acquiring or joint-venturing,” but that Shopify’s real purpose was to get as much knowledge about its business as possible so they could copy it.
It goes on to claim that Shopify is engaging in “monopolistic and anticompetitive business practices in order to stifle competition” for BNPL services on its e-commerce platform, alleging that the company used its market power to favor its own BNPL service for merchants, crowding out competitors .
Sezzle, which launched in 2017, alleges that it once had a “symbiotic relationship” with Shopify, but now Shopify intentionally makes it more difficult for consumers to find alternative BNPL providers, and that even if consumers selected Sezzle as a BNPL option when buying a product, Shopify would “intercept” consumers and have them pay through Shop Pay Installments instead.
Although Shopify accounted for less than 5% of its Q1 revenue, Sezzle argues that the lawsuit is key to protecting merchant and consumer choice. It's seeking an injunction and treble damages, paid out in 4 interest free installments. (LOL, j/k on that last part.)
Here's why this is a huge lawsuit:
Doesn't Shopify limit ALL types of payment options on its platform (not just BNPL)? They've historically moated the shit out of payments. That's kind of their thing — which makes this Sezzle lawsuit fairly landmark.
If Sezzle were to come out victorious, would it open the door for other payment providers — like PayPal, Apple, Google, Amazon, Checkout, Bolt, etc — to have a case against Shopify for favoring Shop Pay? And if so, does that give Shopify a huge incentive to settle this out of court?
Or has Shopify grown so big that it's too late? Did their model of steering merchants towards their internal payment processing service work as a startup, but now that they're a market leader, it's considered monopolistic?
Does Shopify even have to allow alternatives to its own payment processing on its platform? Comparably, Amazon also partners with Affirm for BNPL payments, and not Sezzle, which isn't an option at all on the site. Can Sezzle sue Amazon for not integrating its BNPL service, which could be considered worse than allowing it and steering customers away from using it?
The impact of this Sezzle vs Shopify lawsuit is larger than most people realize, and I'll be following it closely.
I'd love to hear your thoughts on the case. Join the conversation on LinkedIn.