Is Amazon a Bully?

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Amazon.com (NAS: AMZN) may have served its customers well this holiday shopping season, but there's at least one merchant that isn't seeing things the same way.

M-Edge, a maker of covers and sleeves for e-readers and tablets, is suing the leading online retailer over a list of charges including patent infringement and unfair competition.

M-Edge has been a somewhat reluctant merchant on Amazon's website, but it feels that Amazon has been trying to shut it out in an effort to move more of its proprietary Kindle accessories.

Amazon's Kindle line appears to be M-Edge's top draw, judging by its website, though the small company also makes stylish and practical third-party products for Apple's (NAS: AAPL) iPad 2 and Barnes & Noble's (NYS: BKS) Nook.

M-Edge claims that a three-year deal it signed with Amazon two years ago calls for Amazon to collect 8% of its sales, but Amazon countered last year that it wants a 25% slice. As the lawsuit plays itself out, it's worth noting that M-Edge's products are still being sold on Amazon.com.

It's always a love-hate relationship between gadgetry makers and the companies hopping on the bandwagon by providing accessories that the original manufacturers haven't gotten around to perfecting. ZAGG (NAS: ZAGG) has made a cozy living out of selling protective film and functional sleeves for Apple products.

However, things are getting personal here because M-Edge feels as if it's being cheated. It's only natural to want a presence on Amazon. The e-tailer has been playing nice with outside merchants for years. Amazon is also, naturally, where Kindle and Kindle Fire buyers hang out.

If M-Edge has a strong case here -- and I'm not just talking about its Kindle cases -- this can really blow up in Amazon's face.

According to ForeSee, a customer experience analytics provider, Amazon was the top dog in e-tail consumer satisfaction this holiday season. A legal tussle with a merchant isn't going to make deliveries any slower or its service less complete, but reputations matter. If shoppers begin to see Amazon as a retailer with an agenda that involves pushing its own products at the expense of others, it will become less trustworthy.

Amazon better make sure that it has a strong case here, since there's more at stake than just a legal judgment.

If "lawsuit" is the one word that Amazon doesn't want to hear, just imaginethe two words that Bill Gates doesn't want to hear. Stumped? A timely report has the answer. It's free, but only for a limited time socheck it out now.

At the time this article was published The Motley Fool owns shares of Apple and Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com and Apple. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz owns a first-generation Kindle and a Kindle Fire. He does not own shares in any of the other stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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