State attorney general Bob Ferguson filed a lawsuit in King County Superior Court in an attempt to block the deal, The Seattle Times first reported.

The two grocery retailers first proposed the deal in 2022. Kroger was slated to buy Albertsons for $24.6 billion, pending regulatory approval. The merger would allow the chains to create a “premier omnichannel food retailer,” Kroger said in a statement at the time.

Kroger is No. 8 in the Top 1000, Digital Commerce 360’s ranking of North America’s leading retailers by online sales. Albertsons ranks No. 26. The two chains also make up the first and second largest retailers in the food and beverage category of the Top 1000.

Why is the attorney general suing to stop the merger?

Ferguson says the merger would give Kroger a near-monopoly in Washington.

“The Proposed Transaction would combine the two largest — and, in some areas, the only — supermarkets in many communities across Washington, which is likely to lead to higher prices, lower quality, and less variety in many local markets throughout Washington,” the lawsuit reads. 

Kroger and Albertsons are the two largest grocery chains in Washington. With more than 300 combined locations in the state, together they account for more than 50% of total grocery sales. 

“This merger is bad for Washington shoppers and workers,” Ferguson said. “Free enterprise is built on companies competing, and that competition benefits consumers. Shoppers will have fewer choices and less competition, and, without a competitive marketplace, they will pay higher prices at the grocery store. That’s not right, and this lawsuit seeks to stop this harmful merger.”

Kroger and Albertsons previously agreed to sell 100 stores in Washington in hopes of gaining regulatory approval. That’s not enough to offset the impact of the merger on Washington consumers, the lawsuit says, calling the move “woefully inadequate.”

Kroger and Albertsons respond to the lawsuit

The two retailers released a joint statement regarding the lawsuit.

“We are disappointed in Attorney General Ferguson’s premature decision to file a lawsuit while the merger is still under regulatory review. We remain in active and ongoing dialogue with the FTC and the other state Attorneys General,” they said in an emailed statement.

“The merging parties will vigorously defend this in court because we care deeply about our customers and the communities we serve, and this merger will result in the best outcomes for Washington consumers,” the statement continues. Kroger CEO Roger McMullen previously promised to fight for the merger in court if necessary.  

“Blocking this merger would only serve to strengthen larger, non-unionized retailers like Walmart, Costco and Amazon, by allowing them to maintain and increase their overwhelming and growing dominance of the grocery industry. In contrast, Kroger and Albertsons Companies merging will bring lower prices to more customers, strengthen and create good-paying union jobs, and bring more fresh, affordable food to more communities” Kroger and Albertsons said.

Amazon, Walmart and Costco and rank No. 1, No. 2, and No. 6, respectively, in the Top 1000. Digital Commerce 360 categorizes them as mass merchants, rather than food and beverage retailers.

Workers at Kroger and Albertsons are unionized with The United Food and Commercial Workers International Union (UFCW). The UFCW voted in May to oppose the merger.

The state of online grocery sales

U.S. online grocery sales declined slightly in 2023, according to annualized results from the monthly Brick Meets Click/Mercatus Grocery Shopper Survey. Sales totaled $95.8 billion, $97.0 billion in 2022 and $97.6 billion in 2021.

Meanwhile, Kroger and Albertsons both grew digital sales in their most recent fiscal quarters. Kroger grew online sales 11% year over year in its third quarter ended Nov. 4, 2023. Albertsons grew its online sales 19% in its second quarter ended Sept. 9.

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The two parties in the antitrust case at least agreed on the year that they could be prepared to argue in court. However, Amazon indicated that it would need more time than the government requested to be fully ready. Assuming that the case goes to trial at all, the FTC and 17 state attorneys general want to begin in May 2026. Meanwhile, Amazon has asserted that it will not be prepared until December of that year.

FTC and attorneys general push for May start

“Plaintiffs’ proposed schedule would allow the Court to set this case for trial starting in May 2026, which balances the strong public interest in the speedy resolution of this case with sufficient time for the parties to conduct fact discovery, exchange expert reports and take expert depositions, brief dispositive and Daubert motions, and prepare this case for trial,” the FTC’s side explained in the joint filing.

In regards to Amazon’s proposed timetable, the plaintiffs do not believe the company’s stated needs are realistic.

“Amazon’s inefficient proposal would be more burdensome for government plaintiffs and the Court and could unnecessarily delay the progress of this case,” the government’s side asserted.

Amazon’s motion to dismiss

Amazon’s preferred next step will be to have the case dismissed. The company filed its motion to dismiss on Dec. 8.

“Amazon competes every minute of every day with thousands of online and brick-and-mortar retailers,” the company argued in that filing. “To meet that competition, Amazon has relentlessly innovated, delivering previously unimagined benefits for consumers and pushing competitors to do likewise, all to make every penny of a consumer’s purchase count for more.”

The company is seeking a dismissal of the case on multiple grounds. Among the reasons, it assesses that its stated benefits to consumers mean it should not be the target of antitrust action.

“Amazon promptly matches rivals’ discounts, features competitively priced deals rather than overpriced ones, and ensures best-in-class delivery for its Prime subscribers,” the motion to dismiss claimed. “Those practices — the targets of this antitrust Complaint — benefit consumers and are the essence of competition.”

Ultimately, Amazon maintained that “[a]ntitrust law does not seek to punish economic behavior that benefits consumers.” In both the Dec. 8 and Dec. 15 filings, it referred to the FTC’s interpretation of antitrust law as “novel.”

Amazon is No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest online retailers in North America. In addition, it is No. 3 in the Global Online Marketplaces Database.

Disagreement over the timeline

“If this case is not dismissed, Amazon anticipates that discovery will be needed regarding all of Plaintiffs’ claims and all of Amazon’s anticipated defenses,” the Seattle-based ecommerce giant wrote in its positions within the filing.

Fundamentally, Amazon maintained that a May 2026 start date would not be adequate.

“Plaintiffs’ proposed schedule does not provide sufficient time for discovery and pretrial proceedings given the extensive discovery that Plaintiffs claim they should be entitled to take,” Amazon’s position stated in the Dec. 15 filing.

Additionally, Amazon contested multiple FTC-side proposals, among them the number of hours needed for depositions, which the company called “one-sided and prejudicial to Amazon.”

“Plaintiffs propose that each side be allowed to take 630 hours of party depositions,” Amazon summarized. “That is the equivalent of 90 seven-hour depositions of Amazon.”

In practice, that requirement would be “contrary to the Federal Rules” and “unduly burdensome in light of the voluminous discovery available to Plaintiffs,” according to Amazon.

The case is assigned to U.S. District Judge John H. Chun in the U.S. District Court for the Western District of Washington.

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Alleged international fraud organization REKK committed “systematic refund abuse,” Amazon claimed in a lawsuit filed in the U.S. District Court in Seattle. The returns described by Amazon in the suit took place over nearly a year, between June 2022 and May 2023. 

Amazon ranks No. 1 in the 2023 Digital Commerce 360 Top 1000, a database of North America’s leading retailers by online sales. 

How the fraudulent refunds worked

REKK’s scheme centered around ordering products through Amazon’s marketplace, the ecommerce giant asserted. Then REKK charged a fee to get the person who ordered the product a refund without actually returning the product, the suit says. For example, one defendant is said to have placed an order for five iPads. Then, through an Amazon fulfillment employee, REKK altered Amazon’s systems to falsely reflect that the iPads were returned, triggering refunds. In addition to the stolen iPads, REKK was paid hundreds of dollars for facilitating the theft, per the lawsuit. 

In another case, REKK is said to have impersonated an Amazon customer ordering two MacBook Air laptops. The group then falsified a police report stating that the products were never delivered. Again, REKK was paid a fee for facilitating the crime. 

REKK carried out the fraudulent returns through the cooperation of Amazon employees, according to the lawsuit, which names seven former employees. Amazon alleges REKK finds employees through Reddit, LinkedIn, and Telegram. The group then uses these social channels to advertise itself to potential customers. The REKK subreddit, since taken down, described its services in a screenshot shown in the lawsuit. “Refunding is when you buy a product and then trick the company into thinking you have returned the product,” the post read.

Who was recruited

REKK recruited one then-employee at a Chattanooga fulfillment center, Janiyah Alford, to approve returns for products that were not actually returned. REKK initially offered Alford $100 per fraudulent return, according to screenshots of text messages in the court filing. Amazon alleges that Alford approved 76 fraudulent returns between February and May 2023 in exchange for a payment of $3,500. The returns caused Amazon to refund more than $100,000 to REKK members. 

Alford told The New York Times that messages asking her to join in the return fraud included her home address and addresses of family members, which she interpreted as a threat.

Another former employee at the Chattanooga center, Noah Page, approved fraudulent returns of 56 items, per the suit. He received $5,000 in exchange for the returns. Amazon says Page’s actions caused more than $75,000 in refunds to REKK members.

Uncovering the fraud

Amazon says it spends more than a billion dollars annually to fight fraud. In 2022, the retailer spent $1.2 billion and employed 15,000 people to find and eliminate fraud, according to the lawsuit. One Amazon investigator ordered an iPad Pro for $2,066.99, then filled out REKK’s service request form through Telegram. The investigator paid $309 to a PayPal account associated with REKK. The investigator then received a refund for the full cost of the iPad.

“When fraud is detected, as in this case, Amazon takes a variety of measures to stop the activity, including issuing warnings, closing accounts, and preventing individuals who engaged in refund fraud from opening new accounts,” Amazon vice president Dharmesh Mehta said in a statement. “This lawsuit serves as a clear and strong message to bad actors that Amazon will not stand for attempts to damage the integrity of our store.”

The scope of return fraud

Fraud isn’t a new threat for Amazon. However, the retailer’s investment in tracking down this case shows how big the problem has become, says Eleanor Ritchie, product manager of return abuse solutions at fraud prevention vendor Signifyd. 

This case “shows that there’s enough of a scope here at the world’s largest retailer that this is no longer just the cost of doing business,” she says.

Fraudulent returns make up about 8%-10% of total returns in online retail, according to Signifyd’s research. In 2022, online returns surpassed $200 billion. Signifyd estimates about $20 billion of those were fraudulent. 

The REKK case is likely not an isolated incident, Ritchie says.

“We have to assume there are more fraudulent attempts happening here that they [retailers] aren’t necessarily onto quite yet. This is just the most egregious example we’re seeing in this particular lawsuit,” she says.

Ritchie says she believes REKK and similar groups are targeting other major ecommerce retailers alongside smaller retailers.

Quantifying returns abuse can be difficult because many retailers have a poor definition of what a fraudulent return is, Ritchie says. As return fraud starts showing up on retailers’ bottom lines, they will likely start investing in monitoring returns more closely. Retailers, especially Amazon, aren’t likely to tighten up their returns perks across the board because customers value them, she says. Instead, she expects to see retailers use machine learning and other AI tools to track returns more closely and make intelligent assumptions about who might be committing fraud.

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There’s big money involved. Interchange is a fee set by card networks— Visa Inc. and Mastercard Inc. dominate the U.S. debit market, but there are 13 in all — charged to the merchant acquirer and paid to the issuer of a card used in a particular transaction. The acquirer—a bank or processor that provides card-acceptance services to merchants — typically passes the cost on to its merchant clients, and it’s a major source of expense. Interchange fees from debit and general-use prepaid cards totaled $31.59 billion in 2021, up 19.1% from 2020, spurred partly by the Covid-19 pandemic that powered an ecommerce boom from millions of newly shut-in consumers.

“Any merchants with regulated debit volume are going to see some benefit if the proposal is finalized in its current state,” Christian Johnson, senior global advocacy manager at CMSPI, an Atlanta-based consulting firm specializing in payment card cost issues, tells Digital Commerce 360.

The public comment period ends in February

The Fed reports payment card networks in the United States processed 92.11 billion debit and general-use prepaid card transactions valued at $4.26 trillion in 2021. Card-not-present transactions, now dominated by Internet purchases but also including phone and mail orders, totaled 29.54 billion to account for nearly a third — 32.1% — of debit volume. CNP debit transactions averaged $64.50 in 2021, well above the average $37.64 card-present debit sale, according to the Fed.

The changes will take effect sometime, possibly months, after a 90-day comment period ends on Feb. 12, 2024. The comment period started on Nov. 14 when the Fed published its official proposal in the Federal Register, the journal of the executive branch.

The so-called Durbin Amendment to 2010’s Dodd-Frank Act, the sweeping law Congress passed in the wake of the 2008 financial crisis, empowered the Fed to regulate interchange received by debit card issuers with more than $10 billion in assets. The ranks of what the Fed calls “covered issuers” include such familiar names as Bank of America, Wells Fargo, U.S. Bank, Chase, and Citi, and dozens of others. Transactions from covered issuers totaled 56.19 billion in 2021, some 61% of all debit purchases. (All of the Federal Reserve data cited in these two stories come from the Fed’s 2021 surveys of payment networks and 163 covered issuers, the most recent available.)

The Fed’s Regulation II, which implements the Durbin Amendment, currently sets a per-transaction interchange cap of 21 cents and 0.05% (five basis points) of the sale, plus another 1 cent for debit issuers that meet certain fraud-prevention standards. That cap, which hasn’t changed since Reg II took effect in late 2011, applies to both card-present and CNP transactions.

Now, the Fed is proposes lowering the interchange cap to 14.4 cents plus four basis points of the sale while increasing the fraud-prevention adjustment to 1.3 cents. On a $50 debit sale, the cap would decline from 24.5 cents to 17.7 cents, a 27.8% reduction.

Next: Will merchants actually benefit from the Fed’s proposed price reduction?

Jim Daly is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. 

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Earlier this month, Drinks sold Wine Insiders for an undisclosed sum to Full Glass Wine Co., which also owns the Winc retail wine ecommerce site. The sale opens the door for Drinks, or Drinks.com, to focus on selling its digital commerce technology stack, designed to enable any online merchant to add alcoholic beverages to product catalogs and such venues as “influencer” web storefronts.

Zac Brandenberg, CEO, Drinks Holdings Inc.

While ecommerce is a fast-growing channel for consumers to discover and purchase beverages, sales of alcoholic beverages through the digital channel are growing even faster, says Drinks chief executive and co-founder Zac Brandenberg.

“Consumers want to engage with brands/merchants at their convenience — where they want to, when they want to. That means from their laptop, their phone, their couch, etc.,” Brandenberg says. “As the alcohol category starts to come online, you’re going to see consumers rapidly adopt a digital shopping modality.”

To capitalize on consumers’ growing preference to purchase alcoholic beverages online, Drinks’s strategy is to focus on bridging the gap between consumers’ growing desire to purchase alcohol online and alcohol companies’ ability to scale online sales. The sale of alcoholic beverages in the United States totals about $250 billion, the company says.

“The growth in the sale of alcoholic beverages online increases the total addressable market opportunity because it expands consumer choice and access, particularly in markets where regulatory restrictions have limited shopping access points or SKUs available to consumers or created other impediments,” says Brandenberg,  adding: “The growth in the sale of alcoholic beverages online is not being fueled exclusively by the shift away from brick-and-mortar shopping.”

At the core of Drinks’s business is its Drinks app for Shopify, which provides Shopify merchants of all sizes with an embedded, real-time alcohol tax and regulatory solution. In addition, the platform helps merchants that want to sell alcoholic beverages manage regulatory compliance, required disclosures, customer messaging, product catalog and inventory management, merchandising optimization, and product fulfillment.

An app for managing online alcoholic beverage sales

“Our vision is to provide an operating system for this industry — that means any business that wants to sell alcohol online,” Brandenberg says. “Our Drinks Shopify App provides the regulatory technology for alcohol producers and merchants to sell alcohol online.”

In addition to its core regulatory tax compliance platform, Drinks offers a wine-as-a-service (WaaS) platform to develop a branded nationwide wine program and offer omnichannel shopping experiences. As a result, ecommerce merchants that don’t carry a liquor license can add alcoholic beverages as a product category in a fully compliant manner directly to their storefront, Drinks says.

Retailers such as Macy’s Wine Shop, Thrive Market and Misfits Market use the Drinks platform.

Other apps offered by Drinks include its Pair platform, which uses data-driven insights with artificial intelligence and machine learning to create personalized shopping experiences. The company also operates a customer experience and retention agency called Electriq, which helps wineries take the tasting room experience online and increase customer loyalty through lifecycle strategies, email/SMS marketing, and web design and development.

“We have a lengthy waitlist of merchants who want to add beverage alcohol products into their storefronts, covering almost any audience,” Brandenberg says. “Drinks is enabling any business that sells something online to now be in the alcohol business. We are able to power online, direct-to-consumer alcohol commerce for bellwether retailers, digital-first commerce brands, and celebrities like Martha Stewart and Geoffrey Zakarian. As we scale our technology footprint, more merchant types, as well as experts, creators and influencers will follow suit.”

One merchant segment that looks especially promising is “creator” and influencer websites, which are not part of the alcohol ecosystem in the traditional sense. Tapping this merchant segment represents new distribution opportunities for alcoholic beverage brands.

“The early innings of creator/influencer-driven marketing have operated similar to an old-school affiliate model, where an endorsement led to a transaction on a brand/merchant site,” Brandenberg says. “That’s obviously evolving, and opportunities abound for the creators themselves to be the conduit for transactions, to maintain that one-to-one relationship they have with their audience. That presents an opportunity for us to enable an ever-increasing number of consumer-facing commerce sites or outlets.”

Peter Lucas is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy.

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The two organizations have grown their commerce operations in recent years, fostering B2B sales to retailers from suppliers of products ranging from home décor to apparel and jewelry. They each benefitted from a temporary COVID-driven surge in demand for online marketplaces as an alternative to in-person trade shows for home and décor products. But more recently, they have become entangled in battles, trading charges of unfair business practices.

Their legal battles began in May but have only recently become more widely publicized.

Faire and Tundra trade lawsuits

Tundra v. Faire Wholesale

Tundra, in a lawsuit filed San Francisco on May 23, 2023, in the U.S. District Court for Northern California, has charged Faire with violating the federal Sherman Anti-Trust Act and California law. It charged Faire with engaging in several unfair business practices to amass a 90% market share.

These include:

• “Deploying unfair, uncompetitive and exclusionary tactics that have thwarted competition from other would-be market participants.”
• “Charging brands fixed-price commissions … making Faire the highest-cost competitor.”
• Requiring brands and retailers conducting business on Faire to refrain from transacting sales with each other outside of Faire.

“These practices violate the Sherman Act, which prohibits monopolization, attempted monopolization, and unreasonable restraints on trade, as well as California’s Unfair Competition Law,” Tundra says in its lawsuit, Tundra Inc. v. Faire Wholesale Inc. It adds: “This suit seeks to halt Faire’s anticompetitive, unfair, and illegal practices, obtain redress for the severe damage caused to Tundra, and restore fair competition in the market for online wholesale product marketplaces.”

In July, Tundra shuttered its wholesale marketplace. But on its website, it says: “We hope to be able to return to operating upon a successful resolution of our case.”

In the meantime, however, Tundra is continuing to operate its Wholesale Co-op platform. It lets retailers buy from more than 100,000 brands. It also lets them earn “cash back” rewards of up to 10% of the value of each wholesale purchase. Tundra forwards the orders it receives to Faire and several other marketplaces.

Tundra charges retailers no set fees but keeps a 10% share of each cash-back reward. It charges brands a 15% commission on the initial order they receive from a retailer.

Faire Wholesale Inc. v. Tundra Inc.

Faire, however, accuses Tundra of arbitrage in trying to use Faire’s business operations to expand the sales transaction volume on Tundra’s Wholesale Co-op.

Faire followed with its own lawsuit against Tundra the same day, May 23, 2023. It charged Tundra with “unauthorized solicitation, storage and use of Faire’s users’ credentials for logging into Faire’s online marketplace.”

Faire argues that Tundra uses those credentials to access such information as available inventory, prices and order lead times that Faire only makes available to the retailers and brands that maintain Faire business accounts.

“Despite Faire’s demands that Tundra stop its unauthorized access, Tundra continues to carry out this scheme to copy data from Faire’s computer systems for Tundra’s commercial benefit,” Faire says in its lawsuit, Faire Wholesale Inc. v. Tundra Inc.

The details

Faire charges no fees to retailers. But it charges brands a 15% commission (recently reduced from 25%) on initial orders from new customers. It also charges 15% on reorders. To encourage brands and retailers to conduct more business on its marketplace platform, the Faire Direct program lets brands send a special link to retailers for purchasing products in transactions not subject to commissions.

Founded in 2017, Faire says on its website that 700,000 retailers use its marketplace platform to find and purchase products from 100,000 brands.

Faire says in its lawsuit that Tundra engages in arbitrage by encouraging brands on Faire to also join Tundra and provide their Faire Direct links to retailers in Tundra’s Wholesale cooperative.

An attorney representing Tundra said they could not comment on the ongoing case.

“These desperate claims have no merit, and are a defensive attempt to retaliate against Faire’s own complaints regarding Tundra’s harmful practices,” Faire said in a statement to Digital Commerce 360. “We look forward to resolving the matter swiftly, and remain committed to giving small business owners around the world the tools and technology they need to compete and succeed.”

Faire has filed a motion to dismiss the litigation and a hearing has been set for Dec. 8

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Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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The social media app’s Shop option, prominently displayed between the For You and Following feeds where users watch videos, presents a never-ending scroll of “recommended” random products, according to an early version Bloomberg has reviewed. It includes products from a $2.99 Nike sweatshirt that appears counterfeit to a $6.99 statue of a “naughty dwarf” sitting on a toilet. Many of the listings, including a budget planner and a waist-trainer vest, say they’re shipped from China, where TikTok’s parent company ByteDance Ltd. is based. That could reignite U.S. regulatory concerns if it puts user data in the hands of Chinese sellers.

The TikTok Shop marketplace will be competing with Amazon.com Inc. to sell a target of $20 billion in merchandise this year, Bloomberg has reported. The effort has been discussed internally as a “community commerce” effort, according to people familiar with the matter. That means it’s meant to capitalize on the app’s potential to bring people together through their niche interests. But the early version of the experience shows no evidence of the ultra-personalized algorithm TikTok is known for in its video feed, which has been key to its success in capturing users’ attention.

Amazon is No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in the Global Online Marketplaces Database. The Digital Commerce 360 database ranks the 100 largest marketplaces by 2023 third-party GMV.

TikTok Shop marketplace listings

Instead, Shop is plagued by the same problems with a free-for-all marketplace that Amazon has faced. Categories and sub-categories of products are filled with overwhelming choice. The Home & Kitchen section shows a 37-cent-mini-car trash can next to a $16 four-foot computer desk and an $8.43 three-piece polyester satin sheet set. Misspelled brand names and implausible prices on many of the listings raise red flags for potential counterfeit sales.

TikTok said the article is “misleading” and that it doesn’t “represent the TikTok experience.”

The TikTok Shop marketplace highlights prices — which are remarkably low and listed in large font. It highlights coupons and free shipping offers in red and green, respectively. TikTok creates a sense of urgency by listing next to a product how many times it’s been sold. It also lists a countdown clock with the hours, minutes and seconds left of a sale.

The TikTok Shop marketplace does not list brands before users click on a product. The majority of product names seem more tailored to search engines and algorithms than human shoppers. One listing, for instance, touts “Women’s 3 Piece High Waist Workout Shorts Butt Lifting Tummy Control Ruched Butt Smile Yoga Short Pants.”

2023 Global Online Marketplaces Report

Analysis of the 100 leading global online marketplaces. Includes over 30 charts, rankings of the world’s Top 100 online marketplaces by 2022 third-party GMV, tips for marketplace sellers, and findings from a new consumer survey. 

View Details

Where are the products from? Are they real?

The most prominent section is for “Today’s Deals.” On the feed Bloomberg has seen, the top promoted product was a snail mucin-based face serum. The serum has recently gone viral on the app: a COSRX-brand Advanced Snail 96 Mucin Power Essence. The seller, listed as FIFTHLINYOUNG-4, advertised the serum for for $7.99, down from $39. But neither number aligns with the $25 price the brand COSRX offers on its website. The TikTok seller also says the product is manufactured in China, when COSRX products say on the packaging that they are made in Korea.

“Dear, yes, it is genuine,” the seller said in a message on TikTok. “The new store is offering discounts during events.”

The seller didn’t respond to questions about why the product says it is manufactured in China. CORSX didn’t immediately respond to a request for comment.

The snail mucin is also the only skincare item FIFTHLINYOUNG-4 has listed.

The other items by that shop include:

• A drone marked down from $999 to $88.
• Alisting featuring photos of the internet-favorite tumbler from Stanley without listing the brand name in the title or description.
• An LED tooth-whitening kit with photos that don’t match the brand name in the listing.

“Even in testing, there are over 200,000 verified U.S. merchants on TikTok Shop selling legitimate products — including over 150,000 beauty products that have been validated through our process and represent some of the biggest names in the beauty business,” a TikTok spokesperson said.

Sketchy sellers previously booted from Amazon marketplace

In June, a person familiar with the company’s U.S. Shop strategy said the company was focusing on American sellers. That strategy appears to have changed. A quick search reveals a number of Chinese brands on the TikTok Shop marketplace that Amazon has kicked off its platform for faking customer reviews. Amazon booted Guangdong SACA Precision Manufacturing from its marketplace in June 2021. Products from its brands Taotronics and VAVA are currently available on TikTok. So is the hot-selling headset brand Mpow. Amazon also removed its parent, Shenzhen Qianhai Patozon Network & Technology Co., from its marketplace.

In its terms that a user can click on before checkout, TikTok says “we make no representations, warranties, or guarantees, whether express or implied, that any content on TikTok Shop is accurate, complete, or up to date. We have no visibility or control over the contents on or available through those sites or resources and you acknowledge and agree that we have no liability for any such content.”

When a user checks out from the Shop tab, she can make purchases from multiple sellers at the same time in the same checkout. TikTok is processing payments through its app, Bloomberg has reported.

That means the company will also be collecting additional information about users, including:

• Card details.
• Billing address.
• Shipping address.

TikTok regulatory concerns

That may eventually lead to extra regulatory scrutiny for the company. TikTok has been under pressure from federal, state and local governments for its data privacy practices. The app’s Chinese ownership has sparked national security concerns over whether it can track or influence Americans on the app. The company has said it is working to isolate sensitive data from its American users so that only staff in the U.S. can access it through a separate unit called USDS.

“TikTok US protected user data is stored in the U.S. and managed by USDS,” a company spokesperson said. “And we work with third-party payment platforms to facilitate transactions on TikTok Shop, with all data managed by the payment partner.”

Lawmakers have been particularly sensitive to whether the app collects location data on users. Prior to the launch of Shop, the company said it updated its app so it no longer collects precise or approximate GPS data, only approximate location information.

But the TikTok Shop marketplace appears to open up some user data to its sellers. In TikTok’s Buyer Policy, the company says that “Sellers are independent controllers of the data that they collect about you via TikTok Shop, and TikTok is not responsible for their compliance with applicable law.”

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C&S will pay $1.9 billion in cash for the stores, which are mostly located in the West and middle of the country, the companies said in a Sept. 8 statement. This confirmed a Bloomberg News report from earlier that week. Closely held C&S is a major grocery wholesaler that also operates Grand Union and Piggly Wiggly stores.

The same day, the United Food and Commercial Workers International Union released a statement in response. It said its “team of experts will be analyzing every aspect of this proposed deal and will assess the impact, positive or negative, that it may have on our UFCW members, the customers we serve, and the communities we call home.”

The Kroger Co. is No. 8 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest online retailers by web sales. Albertsons ranks No. 26.

Fighting for (antitrust) approval

Kroger is betting the store sale will help it persuade the U.S. Federal Trade Commission to allow the Albertsons transaction. The transaction is the centerpiece of the retailer’s push to keep up with Walmart Inc. and Amazon.com Inc. The FTC, which has recently challenged high-profile deals in video games, pharmaceuticals and mortgage software under Chairman Lina Khan, is scrutinizing the merger’s impact on grocery competition.

Amazon ranks No. 1 in the Top 1000. Walmart is No. 2.

“This comprehensive divestiture plan marks a key next step toward the completion of the merger by extending a well-capitalized competitor into new geographies,” Kroger and Albertsons said in the statement.

Frontline workers will remain employed and existing collective-bargaining agreements will continue, they said. Kroger may require C&S to buy a further 237 stores in connection with efforts to win regulatory approval of the Albertsons deal, which would bring the total divestitures to 650. That’s the number Kroger had earlier defined as the ceiling for store divestitures.

The Cincinnati-based company also released financial results for its fiscal second quarter. Kroger grew digital sales 12% in the quarter.

The FTC still could sue to block the deal. Labor unions including UCFW and officials from a range of states have urged the regulator to oppose the merger. They say it would hurt wages and competition. Some senators and members of Congress have also criticized the transaction.

Kroger said the Albertsons acquisition remains on track to close in early 2024, with CEO Rodney McMullen having vowed to fight in court if necessary.

Store footprint

The agreement with C&S covers stores in 17 states and Washington, DC, along with eight distribution centers and five private-label brands. The sale also includes the QFC, Mariano’s and Carrs banners, plus exclusive licensing rights to the Albertsons brand name in Arizona, California, Colorado and Wyoming.

On a combined basis, Kroger and Albertsons currently have a footprint of about 5,000 stores. Walmart has roughly 5,200 retail locations in the U.S., including about 600 Sam’s Club warehouse stores. Amazon, which is already a force in categories such as diapers and some packaged goods, recently began the biggest overhaul of its grocery business since it acquired Whole Foods Market six years ago.

When Kroger announced the Albertsons acquisition in October, the companies said they would spin off as many as 375 stores if they couldn’t find buyers. Kroger later suggested in a merger agreement that 650 was the upper limit for divestitures.

For C&S, the deal will further an expansion into retail grocery stores. The Keene, New Hampshire-based company bought 12 stores from Tops Markets in 2021 when the latter grocer merged with the Price Chopper/Market 32 chain. The FTC approved that divestiture.

“C&S recently expanded its retail operations with the acquisition of 11 Piggly Wiggly Midwest retail stores, and hired a former retail grocery executive with significant retail experience to lead retail efforts,” the regulator said at the time.

In its sprawling wholesale business, C&S supplies more than 7,500 independent supermarkets, chain stores, military bases and institutions with over 100,000 different products.

Aldi opens 1,000th UK store

Aldi opened its 1,000th UK store on Sept. 7 and committed to a further 500 outlets in the country as the German discount grocer snatches market share from rivals.

The supermarket had previously aimed to have 1,200 stores by 2025 and is now targeting 1,500 over the long term, Aldi said that day. That’s ambitious growth for a company that opened its first store in Britain in 1990.

“We’re looking for new Aldi stores from Hackney to Harrogate and Bath to Brentwood,” Giles Hurley, chief executive officer of Aldi UK and Ireland, said in a phone interview. “We’ve had an unwavering will to grow in the UK and that’s been backed up by capital.”

U.K. shoppers have been flocking to Aldi as inflation erodes their purchasing power during the cost-of-living crisis. The discounter became Britain’s fourth-largest grocer last year, knocking Morrisons off the spot. Now, £1 in every £10 spent at U.K. supermarkets is at Aldi.

Shoppers are turning more to store-brand goods to tackle rampant food inflation, a trend that favors Aldi. The grocer also stocks fewer big brands than competitors. The grocer has served more than 1.1 million new customers over the past 12 months, said Hurley.

“We’ve seen customers switch their shopping” to Aldi, he said. “Existing customers are consolidating their spend with us and treating us as a first-stop shop.”

The grocer is growing sales at the fastest pace among supermarkets, seeing an increase of 21% in August from a year earlier, according to Kantar data. Sales at fellow discounter Lidl rose by almost 20% in the same period, while revenue at higher-end rivals Waitrose and Co-op rose by 4.4% and 3.4% respectively.

Competitors are watching Aldi’s rise closely. Both Tesco Plc and J Sainsbury Plc have pledged to match Aldi’s prices on hundreds of goods, while grocers are increasingly doing away with in-store food counters and delis in favor of the discounters’ simpler approach.

More reductions

Food inflation has begun to ease in the UK, though remains at a high level, with the Office for National Statistics reporting a rate of 14.9% in July. Supermarkets are keen to demonstrate they are cutting prices where possible.

“I’m quite optimistic that between now and Christmas there will be more price reductions in our stores,” said Hurley. “When it comes to the longer-term picture on inflation it’s definitely more difficult to read. There are a lot of influences on the grocery sector.”

This year, Aldi will open 20 stores as part of its existing £1.3 billion ($1.6 billion) expansion plan. The new one opening in Woking, Surrey, is one of more than 150 that Aldi has in the South East, as it seeks to attract customers in the affluent region.

Aldi also relaunched its website, priming it for ecommerce growth. The grocer is not currently ranked in any Digital Commerce 360 databases.

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The Microsoft Copilot Copyright Commitment will protect customers as long as they’ve “used the guardrails and content filters we have built into our products” Hossein Nowbar, General Counsel, Corporate Legal Affairs and Corporate Secretary at Microsoft, said in a Sept. 7 blog post. Microsoft also pledged to pay related fines or settlements and said it has taken steps to ensure its Copilots respect copyright.

“We believe in standing behind our customers when they use our products,” Nowbar said. “We are charging our commercial customers for our Copilots, and if their use creates legal issues, we should make this our problem rather than our customers’ problem.”

Microsoft ranks No. 88 in the Top 1000. The database is Digital Commerce 360’s ranking of the largest North American online retailers.

Microsoft connection to OpenAI and generative AI technology

Generative AI applications scoop up existing content such as art, articles and programming code. They then use it to generate new material that can simplify or automate a range of tasks. Microsoft is baking the technology, developed with partner OpenAI Inc., into many of its biggest products. That includes Office and Windows, potentially putting customers in legal jeopardy.

Artists, writers and software developers are already filing lawsuits or raising objections about their creations being used without their consent. In one complaint, lawyer and computer programmer Matthew Butterick accused Microsoft’s GitHub partner of allegedly violating open-source software development licenses. A group of anonymous individuals seeking class action status also has filed suit against OpenAI and Microsoft. They claiming the companies are stealing “vast amounts” of personal information to train AI models in a heedless hunt for profits.

News organizations are mulling their own complaints, comedian Sarah Silverman has filed suit against OpenAI and Meta Platforms Inc., and artists are suing AI image generators Stability AI and Midjourney in a San Francisco court, although the judge has expressed skepticism about aspects of the case.

Copyright infringement and generative AI

Generative AI could raise novel questions about the fair use of copyrighted materials, a legal defense that allows the use of content in certain cases. Fair-use doctrine itself has been further complicated by a May Supreme Court ruling in favor of a photographer who accused the Andy Warhol estate of improperly using her work to create 16 images of the late musician Prince.

It’s not the first time Microsoft has deployed a legal shield to keep customers loyal. In the 2000s, the company offered indemnification to partners and later customers using or reselling its software, a bid to differentiate Microsoft from Linux and other open-source software makers. In 2017, Microsoft, by then a seller of open-source software itself, offered to protect customers of its Azure cloud products from legal claims.

The company in June announced a program to help customers ensure the AI programs they run on Microsoft platforms meet global laws and regulations. Earlier this year, Adobe Inc. also offered subscribers of its AI tools legal protection against copyright infringement.

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Shein and Temu, owned by PDD Holdings Inc., are two of the rising powers in online retail. They are growing threats to the likes of H&M and Zara. The lawsuit offers a rare glimpse into the business models of the two secretive companies — and their fierce competitive practices.

Shein Group Ltd. ranks No. 2 in the Asia Database. That’s Digital Commerce 360’s rankings of the largest online retailers in Asia by web sales.

Pinduoduo offers an app-only marketplace to Chinese consumers but does not operate an ecommerce website, so it is not included in Digital Commerce 360’s Asia Database rankings. Temu, which launched in September 2022, did not have a significant impact on Pinduoduo that year. Moreover, it didn’t have a high enough gross merchandise value (GMV) to make the global online marketplace rankings this year.

Temu and Shein are growing rapidly in US market

Shein has grabbed more than 75% of the U.S. “ultra fast-fashion” market since entering the market in 2017, according to the suit. After Temu entered the U.S. in 2022, Shein responded by forcing clothing manufacturers into supply arrangements that excluded Temu, the suit alleged.

“Shein has engaged in a campaign of threats, intimidation, false assertions of infringement, and attempts to impose baseless punitive fines and has forced exclusive dealing arrangements on clothing manufacturers,” according to Temu’s complaint filed July 14 with the U.S. District Court for the District of Massachusetts.

The allegations come after Shein sued Temu in the U.S. Shein alleged trademark and copyright infringement as well as “false and deceptive business practices.”

Shein led the way in pioneering ultra fast-fashion. It offered consumers the latest fashion products at bargain prices, with shirts and swimsuits as low as $2. That helped the company become one of the most successful startups in the world, with a valuation of $66 billion, according to the market research firm CB Insights.

“We believe this lawsuit is without merit and we will vigorously defend ourselves,” a Shein spokesperson said in an email statement.

Allegations in Temu Shein lawsuit

Temu alleged that Shein engages in at least four strategies to stifle competition. Those include levying fines and penalties on suppliers that work with Temu and forcing suppliers to sign “loyalty oaths.” Shein also issues “public penalty notices and imposes extrajudicial fines on disobedient manufacturers for supplying product to Temu.”

Temu alleged in the suit that, as of May, “Shein has required all of the approximately 8,338 manufacturers supplying or selling on the Shein Platform to execute Exclusive-Dealing Agreements, which prevent those manufacturers from offering products on the Temu Platform or supplying products to sellers on the Temu Platform.”

The 8,000-plus manufacturers that supply Shein represent 70% to 80% of the total number of merchants capable of supplying ultra-fast fashion, Temu said.

Temu said merchants have pulled more than 10,000 listings as a result of Shein’s actions. In the lawsuit, the PDD unit cited examples of clothing manufacturers that had cut their presence or stopped business on the platform, “to appease” Shein.

“Shein knows that manufacturers need Shein’s volume and its access to the U.S. market and it is, therefore, able to coerce manufacturers into arrangements that force manufacturers not to do business with Temu,” the company alleged.

The case is Whaleco Inc. v. Shein US Services LLC, D. Mass., No. 23-cv-11596, 7/14/23

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