Dive Brief:

• Shopify asked a U.S. judge last week to dismiss a lawsuit from buy now, pay later provider Sezzle alleging that Shopify’s rival BNPL product quashes installment-financing competition and violates antitrust laws.
• “All of Sezzle’s antitrust theories are implausible and built on nothing but Sezzle’s dissatisfaction with its own lost business,” Shopify attorneys wrote Thursday in their motion to dismiss the lawsuit with prejudice in the U.S. District Court in Minnesota. Shopify “has no duty to design products in a way that benefits rivals, even if that limits compatibility or affects the quality of its rivals’ products.”
• A spokesperson for Minneapolis-based Sezzle declined to comment Friday. A hearing in the case is scheduled for Dec. 8, according to court filings.

Dive Insight:

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. About 10% of U.S. e-commerce sales are generated through Shopify merchants, the company wrote in its motion.

Shopify – which is based in Ottawa, Canada and operates in more than 175 countries – launched its BNPL offering, Shop Pay Installments, in 2021.

Shopify argued that much of Sezzle’s complaint concerns aspects of the commerce platform that the BNPL company doesn’t like because it’s not helpful to Sezzle’s business.

“Sezzle’s allegations — whether about checkout flow, inventory locking, or order IDs — boil down to frustration that Shopify does not provide Sezzle the assistance it wants on the terms it prefers,” the motion said. 

“Instead of pleading harm to the market overall, Sezzle advances a theory of alleged harm to Sezzle, i.e., that Sezzle received less favorable terms, or lost business, following Shopify’s entry into the BNPL space,” Shopify’s lawyers wrote. “But the antitrust laws protect competition, not competitors.”

Sezzle’s lawsuit, filed in June, alleges that Shopify wielded its “market power” to make its own installment payment services the default BNPL provider on merchant websites, 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 violated the Sherman Antitrust Act, the Clayton Act and Minnesota laws concerning antitrust and deceptive trade practices, the complaint said.

Sezzle’s claims “reduce to a theory” that Shopify used its platform to destroy BNPL competition on that platform, specifying a market that is too narrowly drawn to satisfy antitrust laws, Shopify said in its motion.

“That market is ‘too narrow,’ three times over: (a) It focuses on just one small corner of U.S. e-commerce (Shopify merchants) and narrows the lens even further to (b) just one side of the payment transaction platform, and (c) just one type of payment transaction,” the company wrote.

“As a result, Sezzle cuts out hundreds of billions in online transactions that Sezzle and others compete to process.”

Sezzle CEO Charlie Youakim said in a June press release that the lawsuit aims to ensure that “merchants and consumers have access to diverse and innovative payment solutions of their choice.”