An Amazon seller in the United States spent 18 months and $200,000 in legal fees fighting for his withheld funds and seized inventory following Seller Account deactivation over authenticity issues. In the end, he received about half the $1.4 million in restitution requested. But the biggest victory was the acknowledgment that the world’s largest online retailer treated him unfairly. 

Amazon suspended the seller’s account after suspecting him of selling counterfeit electronics, according to arbitration documents reviewed. Then the company seized $80,000 in his account and 50,000 products stored in its FBA warehouses. 

The merchant, who did not wish to disclose his identity, asked for his money and products back, but Amazon ignored him. He couldn’t file a lawsuit because, like all other Amazon sellers, he agreed to arbitration as a condition of selling on the platform.

After reviewing contracts, interviewing witnesses and reading legal arguments, arbitrator awarded the merchant $775,000 in November. He ruled that Amazon had reason to suspect the merchant and was within its rights to suspend his account. But he said the company went too far by ignoring the seller and withholding his products, including many that weren’t suspected of being counterfeit at all. 

“Given the vast resources of Amazon,” he wrote, “I would hope that in the future it will devote the resources necessary to treat all of its sellers with respect and some semblance of due process.”

The case provides a rare look inside an arbitration process that lawmakers and regulators say favors Amazon by discouraging sellers who lack the money, time and energy to take on the company. 

A report issued last year by the House Judiciary Committee investigating the power of big technology companies revealed that between 2014 and 2019 only 163 merchants—out of the millions who sell on Amazon—had initiated arbitration proceedings against the company. A bill that would end forced arbitration has been discussed in the Senate since 2019, and its advocates hope testimony from Amazon merchants will give it fresh momentum. 

The original intent of the 1926 Federal Arbitration Act was to provide a cheaper, faster alternative to settling business disputes than clogging up public courts. In the decades since, U.S. Supreme Court rulings have allowed arbitration to spread further into day-to-day transactions.

Before consumers rent a car or get cellular service, they’re often asked to sign contracts in which they surrender the right to sue and agree to resolve any dispute through arbitration. Some businesses require new workers to agree not to sue as a condition of employment, practices that can let serial sexual harassers remain on the payroll while their victims take confidential settlements and leave.

It looks like lawmakers are finally waking up to the antitrust implications of big companies using arbitration to gain an unfair advantage over smaller ones.  “Arbitration functions as a way for Amazon to keep disputes within its control, with the scales tipped heavily in its favor,” the House Judiciary Committee said in its report. “As such, Amazon can withhold payments from sellers, suspend their accounts without cause, and engage in other abusive behavior without facing any legal consequences.”

Amazon has no incentive to change its practices even though they often don’t pass muster with lawyers and retired judges who sideline as arbiters mediating disputes. When merchants prevail, the arbiter’s decision sets no legal precedent, so Amazon can do the same thing over and over, knowing most merchants won’t bother mounting a challenge. 

“It’s very expensive and time-consuming, and most small businesses don’t have the money or the time,” says Mario Simonyan, a Burbank, California, attorney. He says most clients decide against launching arbitration cases against Amazon because they typically cost $80,000 in legal fees.

One potential solution is to pass the Forced Arbitration Injustice Repeal Act, which would create a way for Amazon sellers to pursue class-action lawsuits against the company. Jacob Weiss, a home-goods merchant who supports the legislation, testified before the House committee in February. He told lawmakers that, despite spending $50,000 on an arbitration case against Amazon, he failed to recover his losses. Weiss said a second case has dragged on for nine months without resolution.

The anonymous merchant who won his case isn’t waiting for a new law. He paid off debts with the arbitration award and hopes to start a new business “as far away from Amazon as I can get.” His suggestion: “Make the final rulings public so other arbiters can consider them and Amazon won’t lose the argument today and make the same argument with a different arbiter tomorrow and win.”

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Amazon.com and Italian fashion group Salvatore Ferragamo jointly sue several individuals and companies, mainly based in China, for allegedly selling counterfeit Ferragamo belts on its platform.

The companies filed two lawsuits against four individuals and three business entities, according to court documents, alleging that the defendants advertised and sold counterfeit Ferragamo products on the Amazon store, using its registered trademarks without authorization.

Out of seven defendants, the lawsuit says five are based in China and the other two could be in China or North Carolina or California. The lawsuit said several other defendants are presently unknown.

The companies said they are looking to permanently prevent the defendants from causing further harm to Amazon’s and Ferragamo’s intellectual property and to hold the defendants accountable for their actions.

The lawsuit was filed in the United States District Court for the Western District of Washington.

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Jeff Bezos, the founder of Amazon, stepped down from his CEO position, shortly before the United States Federal Trade Commission announced that it was fining Amazon $61.7m, so the company could settle charges that it withheld delivery drivers’ tips paid by customers. 

The full announcement from the FTC is astounding. It states that Amazon regularly advertised that drivers participating in the Flex program would be paid between $18 and $25 per hour, and that drivers would receive all of their tips. That is not what happened.

Instead, the FTC alleges that Amazon put its workers on a lower rate and used customer tips to make up the difference. Amazon allegedly took steps to mislead drivers about this, made the change, and then lied about it. 

“Rather than passing along 100 per cent of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, acting director of the FTC’s Bureau of Consumer Protection.

The FTC also alleges that Amazon only stopped its behaviour, which happened over a two and a half year period, when it became aware of the investigation.

Since Amazon knew when the FTC will release their verdict, it purposely released the news of Amazon CEO Jeff Bezos stepping down, avoiding a PR storm of reputation damaging headlines. Suddenly everyone has a new story and the shocking news of this major scandal just don’t make it to the headlines.

Here is the entire shocking Statement of Commissioner Rohit Chopra:

Here you can view the full press release by FTC:

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