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The Amazon aggregator legal battles: SellerX and Perch facing lawsuits

Industry insiders say the possibility of more lawsuits popping up in the industry has increased in a tougher economic climate.

By Freya Pratty

SellerX — an Amazon aggregator unicorn backed by BlackRock and Sofina — is being sued by an American games company over a deal made last year.

Regal Games, which produces board games, alleges that SellerX failed to promote a game it had acquired, leading to plummeting sales.

The accusation raises questions over the obligations aggregators have to the brands they buy out, and comes amid a difficult period for the industry.

During the pandemic, as Amazon sales boomed, so did aggregators — companies which buy up smaller brands that are doing well on Amazon with the aim of growing them.

The model was popularised by US company Thrasio, which is valued at roughly $5bn. European aggregators enjoyed enthusiastic backing from investors, who poured $1bn into aggregators in a single day last year.

But, in recent months, it’s become the latest VC-hyped sector to feel the effects of the downturn and most of the aggregators have laid off staff. And as the tech market navigates through choppy economic waters, industry insiders say the possibility of lawsuits popping up in the industry is increasing.

The Chalk City deal

Berlin-based SellerX, founded in 2020, has raised $750m, including a $500m round at the end of last year.

It’s used that money to grow its portfolio of Amazon sellers. In April last year, SellerX bought Chalk City, a brand of multicoloured chalk for kids, from Regal Games, an American company set up in the 1940s.

A lawyer for Regal Games told Sifted that SellerX acquired Chalk City for just under $4m.

In a lawsuit filed in New York by Regal Games and seen by Sifted, it asserts that the aggregator had agreed to pay a further $900k after a year — but not if sales decreased by more than 15%.

But, the lawsuit alleges, they did decline. Regal Games alleges that SellerX didn’t fulfil the steps it was obliged to to ensure sales were high enough to trigger the $900k payment.

Speaking to Sifted, Regal Games’ lawyer alleges that there were specific actions agreed upon that SellerX should have taken to ensure the success of Chalk City. These include, she alleges, maintaining sufficient inventories of stock, purchasing advertising space and expanding into new markets.

Regal alleges that SellerX showed “purposeful avoidance of its obligations” and that Regal has a right to recover Chalk City from SellerX, without paying for it back.

SellerX tells Sifted that it “always complies with its legal commitments” and that it will defend itself in court. It declined to comment on the particulars of the case.

It’s not the only lawsuit in the industry

SellerX isn’t the only aggregator facing a lawsuit. American aggregator Perch, which has raised nearly $1bn from investors including Softbank, is facing a similar case in the US, according to documents seen by Sifted.

Perch acquired a brand called Gutter Games. A third party, That’s What She Said, which alleges it had a contract with Gutter Games before the acquisition, is suing both Perch and Gutter Games for breach of contract. That’s What She Said alleges it lost out on $35m worth of profits.

Sifted has reached out to Perch for comment.

Freya Pratty is a reporter at Sifted. She tweets from @FPratty 

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