A lawsuit worth 440 million yuan! A seller takes the e-commerce giant to court over a backend bug

As competition in the Amazon market becomes increasingly fierce, many sellers are looking for new platforms to grow their business. Among these platforms, Shopify has attracted much attention.

The financial report shows that by the end of 2023, Shopify will have more than 4.6 million active merchants; during the Black Friday and Cyber ​​Monday period in 2024, Shopify's sales increased by 24% year-on-year to US$11.5 billion , a record high.

However, this fast-growing e-commerce giant was sued by sellers over technical and other issues .

E-commerce giant sued by sellers for $60 million

The lawsuit was initiated by Redline Steel, a well-known American home decoration brand . The lawsuit involved 60 million US dollars and was heard by the Ontario Superior Court.

Public information shows that Redline Steel was founded in 2016 by retired U.S. Army soldier Colin Wayne . It mainly deals in steel, canvas and other home accessories, and is famous for its high quality and customizability.

According to a blog post posted by Colin Wayne on social media, his brand has been shut down since March 2023, and the main reason for the closure is Shopify.

Colin Wayne said that since its establishment, Redline has been using Shopify to build and manage brand websites. Over time, they found that Shopify had serious technical mismanagement and negligence - especially in terms of data tracking and analysis, which was the cause of the collapse of Redline's operations. The editor found through inquiries that although the stores on Redline's website, Amazon and other channels were not emptied, they all indicated that they could not be purchased.

Colin Wayne said that after consulting several domestic and foreign law firms (in the United States) and hiring a cyber forensics company, he "decided to engage in a major legal dispute with Shopify."

According to the indictment, Redline's lawsuit against Shopify mainly revolves around the following points:

1. Poor Meta Pixel Management

The lawsuit states that Redline relied heavily on digital marketing to drive sales, particularly using Meta Pixel technology to track customer behavior, optimize advertising, and retarget audiences. But Shopify introduced serious problems, including caching, when it integrated the Meta sales channel in 2021. These problems prevented Redline from accurately purchasing ads and rendered the campaign ineffective.

The lawsuit highlights that Shopify acknowledged "known caching incidents" but failed to resolve the issues. Redline believes these technical failures severely hampered its ability to reach customers and generate revenue, ultimately leading to the collapse of the brand.

2. DNS and IP address differences

The lawsuit also highlights discrepancies in Shopify's Domain Name System (DNS) settings that affected Redline's website accessibility. The lawsuit alleges that IP addresses did not match between Redline's domain provider (GoDaddy) and the settings specified by Shopify. For example, Shopify said Redline's A record should point to 23.227.38.65, but public tools showed it resolved to 23.227.38.32.

The mismatch was reportedly caused by a GitHub update approved by Shopify, disrupting Redline's domain connection during a critical period. In addition, the Shopify-controlled subdomain shops.myshopify.com also failed to resolve correctly for a long period of time, further exacerbating the company's operational challenges.

3. Breach of contractual obligations

This is also the core point of Redline's lawsuit against Shopify. Redline claimed that Shopify's terms of service promised to provide reliable tools and infrastructure to support merchants' operations, but the platform failed in several key areas:

Neglecting to notify the merchant of critical updates, such as changes in IP addresses;

Failure to resolve inconsistencies between Shopify-managed DNS settings and network configuration;

Poor management of integrated tools such as Meta Pixel leads to inaccurate data.

For a platform of Shopify's size, this $60 million lawsuit is undoubtedly a huge challenge, not only financially but also in terms of reputation.

Other sellers have had the same problem

Notably, Redline mentions in its lawsuit that the problems encountered by the brand are not unique.

In other words, many Shopify merchants have encountered similar problems:

“ Terrible app , can’t connect products and pixel to my Facebook store … I ’m losing a ton of money every day because of this terrible app ( Shopify ) ”

“ It’s terrible . All the sales channels that Shopify offers are so frustrating … ”

“ It ( Shopify ) worked great before the app broke . Now Facebook, Instagram, and Messenger no longer integrate with Shopify and the app doesn’t recognize my Meta page …Meta is our biggest source of customer referrals and we are losing money every day… ”

The editor found that in terms of the overall functionality and user experience of the Facebook & Instagram apps , App Store users rated Shopify at 4.2. Although there were more than 5,800 5-star reviews, there were more than 1,180 one-star reviews.

The editor summarized some one-star reviews and found that problems such as unstable Pixel behavior, inaccurate data tracking, and lack of timely support from Shopify were mentioned many times.

If Redline's claims are proven in court, it would mean that there are widespread problems with Shopify's infrastructure, which could affect millions of platform users around the world.

Foreign media reported that as the lawsuit progresses, it may have a profound impact on Shopify and its merchants. Its direction may cause sellers and others to pay attention to Shopify's technical infrastructure and customer service. If Redline's claim is supported, Shopify will need to make improvements and efforts in many aspects, including but not limited to:

Improve its technical infrastructure to prevent similar failures

Improve communication with merchants about key updates and issues

Provide stronger support to solve technical problems in a timely manner

Although these changes require a lot of financial support, they are all beneficial to the platform merchants. The editor believes that these changes are also beneficial to the platform in the long run, because only a stable backend system and strong merchant support can enable the platform to attract more sellers in the fierce competition.

There is also a view in the industry that for Shopify, this case is very important "for the platform to solve systemic problems and ensure the reliability of the platform to merchants"; whether the company chooses to settle or go through the litigation process, the result may reshape the standards of global e-commerce platforms.

For sellers, this lawsuit highlights the critical role of technology in the current business environment. As the e-commerce market continues to grow, ensuring the reliability of technological infrastructure is crucial to sellers' operations and success.

Overall, this lawsuit is a reminder to both the platform and sellers.

For sellers, Redline's experience once again emphasizes the importance of diversifying technology infrastructure and developing contingency plans. Sellers need to do the following in their operations: before relying on a single platform for critical operations, they need to conduct thorough research and risk assessment; regularly review important tools such as domain name configuration and tracking tools during operations to ensure that they are working properly; and establish backup systems to minimize losses caused by technical failures and interruptions.

For the platform, this case highlights the necessity of strong technical support, transparent communication and accountability. If problems arise that affect sellers' operations, they will not only face litigation and compensation, but will also affect the platform's credibility among sellers and even cause customer loss.