MINNEAPOLIS (LN) — A federal judge in Minnesota on Monday denied in part Shopify’s motion to dismiss, allowing Sezzle’s Sherman Act monopolization and restraint-of-trade claims to proceed while throwing out an unlawful tying allegation, in a ruling that validates an untested aftermarket market-definition theory.
U.S. District Judge Eric C. Tostrud ruled that Sezzle plausibly alleged Shopify possessed monopoly power in the United States drag-and-drop e-commerce platform market and the subsequent aftermarket for “Buy Now Pay Later” services on Shopify-hosted websites.
The complaint alleges Shopify used its dominance to suppress Sezzle after launching its own competing service, Shop Pay Installments, in 2021. Sezzle claims Shopify obscured its checkout option, forced merchants to pay a 1–2% fee for using Sezzle, and disabled key features like real-time inventory locking to steer business toward its own payment processor.
“Sezzle has plausibly alleged that the relevant market is the United States aftermarket in BNPL services on Shopify-based websites,” Tostrud wrote. “It has alleged a distinct foremarket—drag-and-drop e-commerce platforms are distinct from ‘plug-in’ based software, enterprise software, and online marketplace services like Amazon.com.”
The court rejected Shopify’s argument that the case should be dismissed under the stricter standards applied in Epic Games v. Apple, which required plaintiffs to prove consumers lacked knowledge of aftermarket restrictions of their initial purchase. Tostrud noted that Sezzle’s allegations of Shopify’s 70% to 95% market share in the foremarket meant consumers had “minimal ability to discipline the company’s conduct in aftermarkets,” citing Lambrix v. Tesla, Inc. for that principle.
Sezzle’s Section 2 monopolization and attempted monopolization claims survived because the complaint detailed how Shopify’s conduct—specifically the “counterintuitive purchase screen” and the third-party payment fee—stifled competition rather than resulting from a superior product.
However, Tostrud dismissed Sezzle’s unlawful tying claim under Section 1 of the Sherman Act. The judge held that Sezzle failed to plausibly allege that Shopify coerced merchants or consumers into using Shop Pay Installments. The court noted that merchants could choose not to use Shopify’s payment processing, and consumers had other viable economic options, citing allegations that 15% to 25% of BNPL sales on Shopify platforms were separate sales.
The remaining Section 1 restraint-of-trade claim survived, as did parallel state-law claims under the Minnesota Antitrust Law and the Minnesota Deceptive Trade Practices Act. Tostrud ruled that the state claims rise and fall with the federal ones, meaning the tying-related state claim was dismissed while the restraint-of-trade state claim proceeded.
Shopify’s motion to dismiss was granted without prejudice on the tying counts and the related state antitrust claim, leaving the door open for the company to challenge those allegations again if the complaint is amended.
Tostrud issued the ruling in Sezzle, Inc. v. Shopify, Inc., Case No. 0:25-cv-02395.