SellerX — an Amazon aggregator unicorn backed by BlackRock and Sofina — is being sued by an American games company over a deal made last year.
The games company alleges that SellerX failed to promote the game it had acquired, leading to plummeting sales: an accusation which raises questions over the obligations aggregators have to the brands they acquire.
The legal battle comes amid a wider turn in fate 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 has a roughly $5bn valuation. The European aggregators enjoyed enthusiastic backing from investors, who poured $1bn into aggregators in the industry in a single day last year.
But, in recent months, it has 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 continues through choppy economic waters, industry insiders say the possibility of more lawsuits popping up in the industry increases.
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 games 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 it a further $900k after a year — a payment which would only stand if sales didn’t decrease by more than 15%.
But, the lawsuit alleges, they did decline. Regal Games alleges that SellerX didn’t fulfill 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 told 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 funds including Softbank, is facing a 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
