Justin Bachman
4 min read
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This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter.
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Buy now, pay later company Sezzle sued Shopify Monday, alleging in a federal lawsuit that the Canadian e-commerce marketplace systematically damaged its business and violated antitrust laws when it favored Shopify’s own BNPL offering over that of Minneapolis-based Sezzle for the past four years.
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Last year, Shopify’s BNPL installment payment program exceeded 75% of all its BNPL transactions among Shopify-based merchants, three years after Shopify added its own BNPL product to compete with that of Sezzle and other providers, said the lawsuit filed in U.S. District Court.
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Shopify media and investor relations spokespeople did not respond Tuesday to emails seeking comment. The Ottawa-based company, which offers technology to build online stores, says its technology powers websites for millions of businesses in more than 175 countries.
Shopify is the largest company offering software for entrepreneurs to establish their own e-commerce businesses through a variety of easily-managed templates, according to the lawsuit. Shopify launched its BNPL offering, Shop Pay Installments, in June 2021.
Shopify “used its market power” to make its own installment payment services the default BNPL provider on merchant websites, according to the lawsuit, and “rigged” the checkout process to make it “extraordinarily difficult” to choose another BNPL option.
Shopify also imposed fees on millions of merchants through contracts that “penalized them” for using Sezzle or another non-Shopify BNPL option, according to the suit.
“Shopify’s ongoing misconduct has therefore systematically eroded Sezzle’s business with Shopify merchants, allowed Shopify to dominate the BNPL market, and reduced (or eliminated) the BNPL choices and quality available to merchants and consumers alike,” Sezzle said in its lawsuit, which seeks an injunction and financial damages.
Sezzle also alleges that Shopify ended merchants’ use of an “inventory-locking” tool that helps retailers prevent oversales of their available inventory — and thus angry customers canceling orders — so that only Shopify could offer that feature.
Prior to Shopify starting its own BNPL product, Sezzle said the total value of its transactions on Shopify stores rose 1200% from January 2019 to June 2021, with the number of Shopify merchants using Sezzle tripling.
