AMAZON NEWS ROUNDUP FOR JULY – SELLERS SURPRISED BY JUSTICE AND FAIRNESS
News of justice for Amazon third-party sellers has taken the community by surprise. After years of complaining, something good happened. Sellers are taking the news calmly. As one seller said, “Don’t worry, it won’t last.”
All kidding aside, it is kind of surprising to see government work for the people. Governments in Europe and in the US are finally looking into and challenging the way the biggest online sales platform does business and treats its third-party sellers. German antitrust regulators have compelled Amazon to change the terms of its agreement with marketplace third-party sellers based in Germany. You can read the entirety of the agreement changes HERE
In Germany, third-party sellers had complained that Amazon’s terms of service were stacked against them, a view backed by the German cartel office which found Amazon dealt with them in an “opaque and arbitrary manner.”
Not to be outdone, the European Union immediately announced it was launching its own investigation into Amazon’s business practices. Vanity Fair reports the EU will focus on how Amazon uses sales data from third-party transactions to develop in-house products that then have an unfair competitive advantage.
And California is pursuing similar legislation to cover third-party sellers based in that state using online platforms like Amazon. This is part of the legislation regarding sales tax in California and the definition of a marketplace.
It’s an embarrassment of riches for sellers. What does it all mean at the end of the day?
Our Seller Agreement Will Be in Plain English
I’m imagining lawyers for Amazon wailing and ripping their hair out for this one. Lawyers don’t like plain English in contracts. So far, it still reads like a contract to me. Check out the redlined version here for an idea of what has actually changed. The new contract – with regional differences – will be effective in mid-August worldwide.
Amazon Must Be Fairer to Us
Amazon’s current contract can be summed up as: No matter what happens, it’s the seller’s fault. Amazon is not liable and can do anything it wants to sellers: withhold seller funds, seize their inventory, dispose of inventory without the seller’s permission, suspend them for any reason–and there is nothing we can do about it. It’s the Amazon kingdom.
Under the new rules, Amazon must:
- Give 30-days’ notice and a reason for removing a merchant from its platform*.
- Have 30 days to appeal A-Z claims and chargebacks
- Transparency (gasp!)
- Fairer presentation of customer reviews
- Easier to understand contract
- You don’t have to go to Luxembourg to arbitrate a dispute if you are selling in the EU.
- Confidentiality eliminated – we can speak out on Amazon
Amazon is changing its seller contract worldwide, not just in Germany. New language has been rolled out. I’m excited and skeptical. After all. Amazon believed it WAS giving us a reason for suspensions. We’ll have to wait and see if the new suspension notices are any clearer.
*There’s also a lot of situations where 30 days’ notice is not required – fraud, counterfeit and other criminal activities, as well as serious safety concerns. People suspended for those reasons will have the same dizzying, distressing experience as before. In addition, Amazon is not required to provide details in these cases.
In the revised contract I noticed that Amazon must give us 7 days to “cure” the situation when they give us notice of a “material breach” of the contract. They are not clear what exactly constitutes a material breach beyond the obvious of illegal activity. I guess we’ll find out. Most of my clients respond within days to any suspension so this won’t change behavior on the part of sellers. This is particularly irritating to me, however, because Amazon sometimes takes weeks to get back to sellers. We drop everything to appeal our suspensions, but there is no requirement that they respond in a timely way.
I noticed that they can notify us by email OR through Seller Central of a breach. This means it won’t always be email and that sellers need to keep an eye on their dashboard for infractions.
The transparency clause means that Amazon has to make contract changes, policies and rules easier to find AND they have to give 15-days’ notice before making changes. A heads up from Amazon will spare a lot of sellers from possible suspensions if they are given time to make changes, update listings, etc. This is perhaps the best news out of all of it because we’ve seen so many suspensions that were avoidable except that the seller did not know the rules had changed.
Having 30 days to appeal an A-Z claim is very helpful. Previously, once Amazon closed an A-Z case your goose was cooked. We used to tell sellers to refund the buyer immediately and then appeal because they didn’t want the A-Z claim on their account. Amazon weighs A-Z claims very heavily against sellers. Now sellers will have time to appeal and get reimbursed if the fault was not theirs. You should probably still reimburse the buyer quickly – a refund will be given for most claims – but at least the A-Z claim won’t weigh down your account.
We also now have 30 days to appeal Amazon refunding a buyer. Legitimate reasons to appeal might include suspected fraud or theft by the buyer. If you are FBA, you can arrange for the returns to be sent to you for inspection. If you get a brick instead of the iPhone you shipped out, you can appeal the refund.
The confidentiality clause was interesting. Technically Amazon could have gone after seller-bloggers like me for revealing information “not generally known to the public” about Amazon. Or they could have gone after sellers who protested Amazon practices in the media or on social media, or sellers who reported them to governmental agencies. We were required to get prior written permission from Amazon before making public statements. They never enforced this that I know of, and now they can’t.
We are still obligated to protect buyer confidentiality and customer data forever, of course.
Fairer Product Reviews
Sellers will be at less of a disadvantage against Amazon when it comes to product reviews. Amazon’s Vine program will now be available to brands and their agents on the platform, not just to products sold by Amazon Retail. I’m assuming this will be through Brand Registry.
Shared Liability – Sort of
The new rules mean that Amazon cannot push all the liability for a transaction on to the seller. They now share some of it with us. We are not forced to indemnify Amazon for all claims by third parties.
“In the future Amazon will now be liable to the same extent as sellers for intent or gross negligence and for any breach of major contractual obligations. The exemption obligation of the sellers will no longer apply to merely alleged violations of intellectual property rights or contractual obligations, but only if concrete indications exist.”
I’m not a lawyer, but this sounds to me like Amazon can be held liable for IP infringement on its platform. This has huge implications for Amazon and for sellers. For one thing, Amazon is a much bigger target for a brand seeking satisfaction. For another it means that Amazon will possibly be doing more to ensure that claims are legitimate. Currently anyone can file an IP claim with very little basis and Amazon tells sellers to work it out with the rights owner. They’re out of it and they don’t take sides. The seller struggles to recover from false claims, and Amazon does nothing. Now that they are liable, I hope this means they will be doing more to ensure the claims are valid before ruining a seller’s livelihood over a lie. We will also likely see them take more action about trademark claims that are concrete. This is good for brands on the platform.
What might this look like? Lots more takedowns of listings, yes, but also Amazon taking an active role to get permission from the rights owner for listings on its platform. Now they do so for any product sold to them directly through vendor central, but will they now be taking action to get IP permission for listings where it doesn’t sell? The next few months will be very interesting, I think.
If a brand claims that it never gave permission for a product to be sold on its platform, Amazon may take the listing down permanently. If this is the brand’s intent, they are happy. If, however, the tactic was to take down unauthorized resellers only and to keep the listing live on the platform, they may not be happy. They’ll have to give permission in that case which lets the other sellers off the hook for infringement. As long as those sellers can prove that they bought from an authorized source, they can sell the brand’s products. I hope this means no more bogus claims from rights owners. I’m eager to see how this plays out.
Most sellers never read their contract with Amazon. They just sign up. They don’t know what they are on the hook for until they get in trouble. I always suggest that people read it, but it is some 40 pages PLUS it encompasses every policy, restriction and guideline they give us on Seller Central – hundreds of pages of information. As someone who reads it regularly, I can tell you it’s a lawyer’s wet dream of inscrutable text. At least it will now be easier for sellers to find and read their contract.
One aspect of the contract that is not changed is our ability to sue Amazon or form a class action suit. Sellers are prohibited from ever suing Amazon over anything…even as a consumer. You give up ALL consumer protection rights as a seller. I bring this up because I feel this aspect of our relationship with Amazon is ripe for change. We may see lawmakers like Senator Elizabeth Warren in the US or lawmakers in other countries take on this aspect of unfairness in our contract with Amazon.
Liability Insurance Required
In all the excitement about these possible contract changes in California, one critical point has gotten lost. The proposed California law, AB 1790, requires California third-party sellers to have liability insurance. Amazon also requires that in its seller agreement but is lax about enforcement. I expect that to change.
Now that the Pennsylvania Supreme Court has ruled that Amazon can be held liable for defective products sold by third parties, Amazon will make sure we all have liability insurance. Given the company’s penchant for coming down like Thor’s hammer, I expect to see suspensions for non-compliance. Get your papers in to Amazon now. Avoid the rush. This may be the only warning you get.
A Kinder, Gentler Amazon?
The California bill that passed the state Senate recently requires Amazon to explain in more detail why a seller is suspended. It must provide clearer guidelines on when Amazon can withhold funds from seller. The terms of service must be drafted in plain and intelligible language.
I admire the lawmakers’ optimism, I really do. We’ll see how “clearer” and “plain and intelligible language” are interpreted by Amazon.
Nonetheless, these proposed changes are good for sellers. At present, Amazon notices are vague, cryptic and sometimes completely inaccurate or incomplete.
Clearer guidelines for when Amazon can withhold funds from sellers would be very helpful too. Right now, Amazon will withhold funds from sellers for virtually anything. When a seller is suspended, Amazon withholds funds but is supposed to pay them out after 90 days if the suspension is not resolved sooner.
Amazon holds onto to them for three months to give the seller time to resolve the issue(s), and for any returns. When Amazon gives the money back to the seller, it assumes that any returns or exchanges have all been processed, and the seller gets a disbursement of the funds left over.
That’s how it used to work. Then Amazon started keeping seller money permanently and seizing their inventory in cases of inauthentic claims, forged documents, counterfeit goods or suspected fraud. On the face of it this seems fair. You shouldn’t profit from selling stolen or counterfeit goods, right? Except sellers have no court of appeals or any other way to prove that Amazon’s claim is wrong. If the Amazon system was perfect…maybe that would be fair.
Sellers provide invoices for verification in an inauthentic claim, for example. Then, Amazonians call the business/brand/distributor in question in the middle of the night and claim that the invoices couldn’t be verified. Goodbye inventory, goodbye dispersement funds. Sellers give Amazon contact information at the supplier, and Amazon instead call and talk to a receptionist to verify the invoices. When he or she can’t help, Amazon claims the invoices couldn’t be verified.
Sellers turn in invoices to Amazon and they have stamps like “PAID” on them or other internal notes or checkmarks, and Amazon’s system spits them out as “forged and manipulated.” Honest sellers keep sending in their invoices because they know they are legit. Amazon annotates in their account that they are sending in fake invoices, so they are banned from the platform. A human could look at these invoices in 3 seconds and see what’s going on, but Amazon avoids humans as much as possible.
I had a client who was told by Amazon that he was using a stolen credit card to buy inventory, making them stolen goods. So Amazon just blocked him, locked him out of his Seller Central account, seized the goods and kept his money.
My client swore he was not using a stolen credit card, and he could prove it. However, we never were successful in getting Amazon to even look at his case or to give him and us any information about what evidence it had against my client. I looked at his card statements and driver’s license. It looked to me like he was paying for those cards. Amazon wouldn’t even talk to him.
It would be amazing if Amazon truly explained how and why it reaches its conclusions because we know how they sometimes get it wrong. That’s not the reality today, nor with the new contract changes. They can still keep their proof to themselves.
And because we can only arbitrate and arbitration is stacked in Amazon’s favor…this is an area ripe for reform.
Arbitration: Unfair and Costly
That brings us to a recent article that claims Amazon is the biggest abuser of forced arbitration. I don’t know if I would say that Amazon is an abuser of forced arbitration, but it’s the biggest user.
Even though I believe that the American Arbitration Association is a neutral third party, the deck is stacked against sellers. They don’t know what “evidence” Amazon has on them. In court, I believe Amazon would be a bit more flexible and work better with sellers. They would be forced to provide their evidence of wrongdoing to sellers as part of discovery. Sellers could effectively prepare their case. With arbitration, Amazon often shows up and still refuses to share “proprietary information” which is basically how they identify and take down sellers.
Because takedown notices can be incomplete or inaccurate, the seller might be preparing for the wrong case. The lawyer Amazon sends to arbitration is not a seller performance person, nor is the arbiter. Proving that you’ve been treated unfairly or wrongly is going to be tough. The lawyer is going to point out that the contract you signed said Amazon could take you down for any reason. They are going to argue strongly that this is a frivolous case without merit.
This is important because Amazon is on the hook to reimburse up to $10K of arbitration fees to sellers unless the case is “frivolous” as determined by the arbiter. In addition, they can go after legal fees from the seller if the case is frivolous. For sellers looking to reclaim up to $50K of damages there is an expedited process. My clients currently contemplating arbitration are looking for hundreds of thousands to more than a million dollars of disbursements and/or inventory seized by Amazon. No expedited process for them.
Moreover, if you are looking to get reinstated, then you are asking for more than monetary relief which means the AAA fees are higher and the process can take longer.
I get it. Amazon wants to keep a lid on legal costs, and lord knows it’s a tempting target for lawsuits. If there ever were the ability to do a class action lawsuit, I think almost every seller on the planet would join it. That is exactly what Amazon fears because it knows it treats sellers badly. Court cases are public, messy and a PR nightmare.
Historically, arbitration has not gone well for sellers. There have been approximately 20 recorded cases over the past five years involving sellers, and sellers won two of them (according to the AAA database).
Amazon says it has chosen this system to make it easier, faster and cheaper, for Amazon and its sellers to resolve issues, but what it has really done is set up a system that inhibits sellers from seeking resolution.
Amazon normally pays the sellers’ AAA arbitration fees, but if the arbitrator determines the seller’s case is frivolous, the seller pays the arbitrator’s fees and legal fees for Amazon.
Furthermore, arbitration isn’t as cheap as Amazon claims. Expect to pay at least $5,000 and more like $10,000+ in legal fees to prepare a case. The American Arbitration Association says sellers can do this over the phone, but most want to make their case in person. Amazon usually gets its cases assigned to Seattle, so that involves travel expenses for the seller and the seller’s attorney too.
No wonder most sellers just tuck their tails between their legs and slink away.
Bad News from Jeff’s Team:
One of our clients received this interesting response after emailing firstname.lastname@example.org.
“Please note that the Executive Seller Relations Team is not able to modify or reinstate listings or accounts… Please understand, we do not review plans of action because we do not have a way to help you reinstate your account. Our Seller Performance team handles that side of our business. We are unable to provide a time-frame as we do not have a way to directly contact them other than sending the escalated request to their queue.”
Since when?!? We’re guessing since December of last year because that’s when it started taking weeks to hear back from Jeff’s team on anything. For many of our clients who have used up their appeals or who have been banned, emailing Jeff’s team is the only way to get someone to look at a case again. We can no longer call Seller Support for help and we can’t email Jeff’s team. If Amazon is going to act as judge and jury over seller’s livelihoods, it should at least provide a fair court of appeals. I’m delighted that Germany and the rest of the EU forced changes on Amazon that help sellers, and I applaud the State of California for re-defining a marketplace and rules of fairness for sellers. These are baby steps in the right direction but only steps. There’s a long way to go before Amazon and its “seller partners” actually represent a valued relationship.
Bad News for Sellers with Used Sold as New Complaints
For years we’ve helped sellers turn off their repackaged returns settings after they got Used Sold as New, Missing Parts and Inauthentic complaints from buyers. We were often able to prove that the buyer dissatisfaction was related to the fact that they were getting a repackaged return and that the returned product was defective or for other reasons should not have been sent out to another buyer.
This usually reduced product quality complaints for our clients and fixed the problem.
Amazon has decided we can’t opt out of repackaging anymore. Does this mean they are going to take repackaging into consideration when buyers complain? Are they going to discount Used Sold as New complaints when the product was a re-send? Not frickin’ likely.
You can opt out of “refurbished” returns but not repackaged. Refurbished is where Amazon takes the item and spruces it up. For example, with apparel returns they may steam, re-fold and place the item in a new polybag. It is more extensive than putting a box back into inventory.
HOW CAN WE HELP YOU?
All of this news tells us one very clear thing: Amazon sellers need us more than ever.
We are known for helping suspended sellers get reinstated, but our goal is to keep sellers from being suspended in the first place. We have more than 25 team members passionately working 7 days a week to protect Amazon sellers like you.
Contact us for specific advice on your situation:
- ecom Chicago. Cynthia returns to Chicago in October (October 16-18, Elk Grove Village, IL).
- You hopefully already know this as an Amazon seller, but when you sign Amazon’s Seller Agreement, you are signing away significant rights and are also agreeing to forced arbitration, which overrides dozens of Federal laws. Read what I have to say about that: The Biggest Abuser of Forced Arbitration Is Amazon
- Amazon has entered the world of Private Label B-to-B branding. From Forbes: ” AdAge reported today that Amazon recently launched the brand AmazonCommercial, a product line of bulk toilet paper, tissues and paper towels intended for a rapidly expanding B2B customer base – and its first foray into the Industrial category”
- Amazon sold 175 MILLION items on Prime Day. US-folks bought a ton, as expected; 100,000 lunchboxes, 100,000 laptops, 200,000 TVs, one million headphones, 350,000 luxury beauty products, 400,000 pet products, 650,000 household cleaning supplies, and more than one million toys. Sellers reported brisk sales as well.
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