Amazon Says The Two Merchants Suing Them Sold Counterfeit Goods, Tried To Get Others To Raise Prices And Said Mean Things To Amazon

Written by Evan Schuman
May 15th, 2013

Amazon (NASDAQ:AMZN) has formally responded to a lawsuit from two of its onetime sellers—in which the sellers said Amazon held their money for more than 90 days, in violation of state law—by essentially saying, “We won’t see you in court, buddy.” Amazon’s position is that a mandatory check-off box on its site means that sellers are not allowed to sue, having agreed to settle all disputes via arbitration.

Amazon’s position is very direct: that by agreeing to be a seller, the merchant has to abide by the terms of the agreement, which includes arbitration. The sellers’ legal position is focused on how long Amazon held the money and that it violates state law, which sets 10 days as the limit. By violating Washington state law, the action goes beyond the contract (and its arbitration clause) and needs to be settled by a government court, in open proceedings. Amazon’s contract sets a maximum time of 90 days and the lawsuit contends that it didn’t even meet that deadline.

Interesting enough, the detailed Amazon response somehow didn’t address the state legal claim, which was the essence of the lawsuit. But while ignoring the state legal issue, the Amazon response did go into plenty of details about why the world’s largest e-commerce site opted to terminate the sales agreement of these two sellers—and why it chose to hold their funds for so long. The reason for holding the funds was because of the poor conduct of the sellers, Amazon argued.

“Amazon withheld payments to each Plaintiff to cover potential chargebacks, refunds or returns to dissatisfied consumers,” Amazon’s motion said. “Amazon’s actions were entirely consistent with the agreements both Plaintiffs accepted and consistent with Amazon’s overarching commitment to customer satisfaction (such as Amazon’s A-to-z Guarantee) reflected in those agreements. But Plaintiffs sued nonetheless.”

The legal debate is jurisdictional. Amazon can argue that its contract gave it the right to hold the funds indefinitely when bad conduct is alleged, but when that action conflicts with state law, federal judges often have to get involved. Amazon would rather they not.

One thing that is clear is that these allegations—excessive holding of monies owed to sellers—are not isolated.


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