Shareholders File Lawsuit Against Amazon For Their Project Kuiper Decision
Only days ago, a lengthy public suit against Amazon regarding its Project Kuiper decision was filed. Project Kuiper, similar to Starlink, is trying to increase global broadband access through a constellation of over 3,000 satellites in low Earth orbit (LEO). Back in early 2022, Amazon signed and announced significant launch contracts with Blue Origin’s New Glenn, ULA’s Vulcan, and Arianespace’s Ariane 6.
In the suit, however, shareholders claim that Amazon “acted in bad faith” and made no effort to properly discharge their fiduciary duties when picking the launch providers. They primarily claim that SpaceX, the leader within the industry was glossed over and not even considered when making the decision. If that were the case, they would have a valid point considering the cost per launch and timeline these satellites are meant to launch by.
The suit puts a lot of focus on Blue Origin and the relationship between Musk and Bezos. They strongly suggest that SpaceX was excluded from consideration from the Project Kuiper competition because of the rivalry between the two. Here I will go more in-depth into this new lawsuit, what it means for the future launches, its significance, and more.
New Lawsuit
With Amazon not having a rocket of its own, in order to launch its 3000 plus LEO satellites, they needed to find multiple companies that could. In April 2022, Amazon announced agreements with Arianespace, Blue Origin, and United Launch Alliance. This contract was a very big deal and offered a significant amount of money to the three companies. The main reason being, you need a lot of launches to put over 3,000 satellites in orbit Specifically, the contracts total up to 83 launches over a five-year period, providing capacity for Amazon to deploy the majority of its 3,236-satellite constellation. Amazon signed an agreement with Blue Origin to secure 12 launches using New Glenn, with options for up to 15 additional launches. The company then secured 38 launches with ULA, and the final 18 with Arianespace.
This leads us to today with the new suit arguing these decisions weren’t in the best interest of the company. Based on information in the lawsuit, Amazon management informed the board’s audit committee in July 2020 it was considering Arianespace, Blue Origin, ULA and a fourth company for launch contracts. The committee, the suit stated, “did not take any steps to oversee the negotiation process or to insulate the process from conflicts of interest.” The suit goes on to argue that the committee spent “no more than a few minutes” discussing the contracts, based on the length of the meeting and number of items on the agenda, before approving them and forwarding them to the full board of directors.
“Despite being the launch provider with the most proven track record and the lowest prices in the industry, SpaceX was seemingly not considered by Amazon,” the complaint states. “By excluding SpaceX, Bezos and his management team minimized bid competition for the launch agreements and likely committed Amazon to spending hundreds of millions of dollars more than it would have otherwise had to.”
In another quote, they point out, “Inexplicably, the most famous, reliable and obvious launch provider in the world—SpaceX—was not among the four companies presented to the Audit Committee. SpaceX—founded, owned, and managed by Bezos’ longtime rival, Elon Musk—has by far the most proven rocket launch track record in history, having now completed some 235 successful launches of its Falcon 9 rocket. SpaceX is also known to be one of the most cost-effective launch providers, due to its ability to re-use rocket boosters and carry large payloads on each launch.”
It even goes on to state, “Bezos was intimately familiar with SpaceX and Musk’s success, as BlueOrigin has repeatedly lost out to SpaceX in competing for lucrative government launch contracts. Each time, Musk has publicly taunted Bezos’ loss on Twitter; and each time, Bezos has filed legal protests and challenges seeking to overturn the government’s decisions to choose SpaceX over BlueOrigin” they said. Based on some of these quotes it’s clear the picture the complaintant is trying to paint.
All this being said, the case does have some substantial claims that need some explaining on Amazon’s side. If they can prove that the decisions made regarding who launches the satellites was influenced by a rivalry and didn’t act in the best financial interest of the company, Amazon could be in a bit of trouble. This lawsuit has some value and claims that are fair when looking at the options and different providers. At the same time, an Amazon Spokesperson said, “The claims in this lawsuit are completely without merit, and we look forward to showing that through the legal process.”
2026 Deadline
There are a lot of important factors regarding this lawsuit, in addition to the cost. Amazon is facing somewhat of a time crunch to launch its Kuiper satellites. Its Federal Communications Commission license requires the company to have half the constellation, or more than 1,600 satellites, in orbit by July 2026, and the full constellation in orbit by July 2029.
The three different rockets picked all have yet to launch and in some cases are facing delays. The first launch of ULA’s Vulcan Centaur has slipped to no earlier than the fourth quarter of this year, while the first flights of Arianespace’s Ariane 6 and Blue Origin’s New Glenn have been delayed to 2024. Currently, none of the three companies have said when those vehicles would start launching Kuiper satellites. When it comes to next generation launch vehicles, often times maiden flights get pushed back and delays continue. This is somewhat of a common theme across the entirety of the space industry. It’s fair to point out that having more than 1600 satellites in orbit by 2026 is a bit ambitious.
The lawsuit takes aim at Blue Origin in particular and claims they were not the best option. Its quoted saying, “Beyond the conflicted nature of these contracts, there was another glaring problem: Blue Origin’s lack of reliability. Since its founding, Blue Origin’s rocket development track record has featured more blemishes and setbacks than successes. Blue Origin needed well over a decade to develop a small rocket meant to take humans into space for only a few minutes at a time” they said. They continued to comment on the company’s lack of progress.
The lawsuit also highlights the BE-4 engine and how it impacts two of the launch providers that were picked. Specifically, in another quote they say, “The effect of the delays in the New Glenn’s development was not limited only to Blue Origin, but was also felt by other rocket companies that were depending on Blue Origin’s engines for use in their own rockets. Most notably, ULA (which won part of the NSSL contract that Blue Origin lost out on) planned to use Blue Origin’s BE-4 engines in its next-generation Vulcan Centaur rocket that remained under development at this time. Because ULA’s Vulcan Centaur depended on receiving fully-developed BE-4 engines from Blue Origin, Blue Origin’s development delays directly impacted the development and testing of the Vulcan Centaur. In February 2021, when Blue Origin was forced to delay the projected launch of the New Glenn to late 2021, ULA was forced to similarly announce that the Vulcan Centaur would also not launch until the fourth quarter of 2021” they said.
The public version of the complaint redacts many details about the launch contracts, including specific dollar values. It does, however, state that the combined contracts were “the second-largest capital expenditure in Amazon’s 25+ year history” after its $13.7 billion acquisition of Whole Foods. Amazon’s second largest acquisition, of studio MGM in 2021, was valued at $8.5 billion. While the suit redacts the contract values, it does state that nearly 45% of their overall value goes to Blue Origin, either through the direct contract between Amazon and Blue Origin or ULA’s purchase of BE-4 engines from Blue Origin to satisfy its own Amazon launch contract. In this case, ULA secured 38 launches with Vulcan. This vehicle uses two BE-4 engines and is not reusable, meaning this contract alone requires 76 BE-4s be bought from Blue Origin to be used on Vulcan rockets. By now, Amazon has spent about $1.7 billion on those three launch contracts to date, including $585 million directly to Blue Origin.
Besides that, the suit continues to put blame on the relationship between Bezos and Musk and suggests that SpaceX was excluded from consideration from the Project Kuiper competition because of the rivalry between them. A good portion of the 77-page complaint is devoted to outlining the history of the competition between the two billionaires and between SpaceX and Blue Origin, which included Blue Origin’s protest of a NASA lunar lander contract won by SpaceX in 2021. That section features screenshots of tweets from Musk appearing to taunt Bezos and Blue Origin. “Given their bitter track record, Bezos had every reason to exclude Musk’s SpaceX from the process entirely,” the suit states. “And Bezos, it must be assumed, could not swallow his pride to seek his bitter rival’s help to launch Amazon’s satellites,” they said.
Conclusion
A new suit was just filed against Amazon trying to make the point that they didn’t act in the company’s best interest by not picking SpaceX. It goes on to site rivalry, delays, cost, and more as reasons why the decision was incorrect. We will have to wait and see how it progresses and the impact it has on the space industry.