Amazon wielded unlawful monopsony power over its Delivery Service Partner (DSP) network to suppress driver wages and control working conditions, according to an antitrust lawsuit filed Tuesday, Aug. 4, by New Jersey Attorney General Jennifer Davenport.
“Today, my office is acting to stand up for thousands of New Jersey delivery drivers who are being exploited every day by one of the world’s biggest, richest corporations,” Davenport said in a statement.
“As our complaint alleges, Amazon built a company worth trillions while subjecting drivers in its delivery network to artificially low pay and punishing working conditions thanks to its overwhelming power in the labor market. I will continue to fight monopolies and the devasting effects they have on our residents,” Davenport added.
Sherman, NJ, Unlawful Monopsony Power
New Jersey is the first state to accuse a company of illegal conduct to protect a monopsony. Unlike a monopoly, which controls selling, a monopsony controls buying. It’s a market structure where one buyer controls the market, according to The American Economic Liberties Project.
The complaint alleges that Amazon’s behavior negatively affected the wages and working conditions of New Jersey residents. The antitrust lawsuit filed in Federal Court in Newark alleges that Amazon’s logistics arm unlawfully holds dominant power over DSP drivers in the labor market by:
✓ Preventing unionization
✓ Restricting companies in its delivery network from hiring one another’s drivers
✓ Limiting labor competition
All of this anticompetitive conduct, the lawsuit alleges, qualifies as unlawful monopsony power and violates both Section 1 and Section 2 of the federal Sherman Antitrust Act, as well as the New Jersey Antitrust Act.
The complaint seeks treble damages for the compensation DSP drivers would have earned in the absence of Amazon’s alleged anticompetitive conduct and permanent injunctive relief to stop the alleged conduct. Treble damages are a legal remedy where a court multiplies a winning plaintiff’s actual financial losses by three.
Amazon’s Delivery Service Partner program
When Amazon created the Delivery Service Partner (DSP) program in 2018, it was promoted as a shortcut to becoming an entrepreneur. It gave entrepreneurs the chance to run independent package delivery businesses, offering startup costs as low as $10,000, discounted vehicle leases, and specialized logistics training, according to news reports.
Owners hire and manage local driver teams using branded Amazon vans. Unlike Amazon Flex, where individuals work as independent contractors, DSP owners are responsible for hiring, training, and managing a team of drivers.
The complaint says the DSP owners and their drivers operate like Amazon employees or contractors. There is allegedly heavy operational micromanagement by Amazon and strict compliance rules to follow. The DSP owner has to manage the high employee churn that comes with delivery drivers, all of the details that come with running a business, then the added risk of Amazon terminating the contract, making changes to pay structures, switching routes, or anything else the DSP doesn’t want.
Cameras, Algorithms, and Branding
The lawsuit alleges the drivers hired by the business owners are evaluated by Amazon’s metrics, scored by Amazon’s algorithms, and filmed by in-vehicle cameras and other technology, per Amazon’s requirements. Amazon controls route allocations, monitors drivers’ performance, and sets the route and number of deliveries. Everyone wears branded uniforms, uses Amazon’s software, and leases company-branded delivery vans.
The complaint further alleges that Amazon watches the drivers so closely, its reps responded to suspected union organizing with intimidation and the retaliatory reallocation of routes.
“In one incident, Amazon allegedly deployed drones around a facility where drivers were organizing; in another, Amazon allegedly ended a DSP’s work at a facility in retaliation for organizing activity,” according to the press release from the AG’s office.
“Amazon is able to maintain this anticompetitive environment because it is the dominant purchaser of labor for DSP delivery services,” per the statement.
The complaint also alleges that Amazon controls the DSPs’ hiring process. Amazon has created a situation where the DSPs are economically dependent on Amazon and have no operational independence.
Amazon’s Other Lawsuits
Amazon is no stranger to lawsuits and right now is fighting antitrust lawsuits brought by the U.S. Federal Trade Commission and the state of California. Public records indicate Amazon has been named in at least 58 confirmed legal challenges relating to competition and market power.
This is also not the first lawsuit the state Office of the Attorney General has filed against Amazon for its misconduct. In one lawsuit, joined by more than a dozen other state attorneys general and the Federal Trade Commission, Amazon was sued for allegations of “stifling competition on price, product selection, quality, and for preventing rivals from attracting a critical mass of shoppers and sellers, including through use of a sophisticated price-manipulation algorithm.”
In another lawsuit, the Division on Civil Rights alleged systematic civil rights violations in the company’s treatment of pregnant workers and workers with disabilities.
In a third lawsuit, the Attorney General and the New Jersey Department of Labor and Workforce Development sued Amazon and its Amazon Logistics delivery network for misclassifying drivers in Amazon’s Flex program as independent contractors.
Each of those cases is ongoing; the trial court denied Amazon’s motion to dismiss in the civil rights case on Friday, July 31.
The Attorney General is represented in this matter by Antitrust Section Chief David Reichenberg, Deputy Attorney General Yale Leber, and Deputy Attorney General Samuel Kontos-Bleifer.
