Amazon Faces Lawsuit From Small Online Sellers

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    It looks like is in hot water again after a lawsuit was filed against them in the U.S. District Court in Seattle last week (March 15th, 2013). The Seattle Times is reporting that a group of small online merchants have filed the class-action lawsuit, claiming that Amazon is violating its own terms, as well as state laws in Washington, by withholding sellers payments for more than 90 days. The lawsuit is seeking full restitution of money that was “wrongfully obtained,” plus financial interest and other unspecified damages.
It is a story that we have been hearing for quite a while now, sellers having their accounts suspended and their money withheld without what many are calling ”due process.” This time, however, some sellers have had enough. The lawsuit has been filed on behalf of a Kentucky DVD seller who claims that her account was suspended last fall and Amazon kept her money for 98 days. A second plantiff who is from Texas has alleged that he ran into the same problem selling flight training material and that his money was actually kept for 100 days.

As you may know, Amazon forces, or rather I should say  “requires” its sellers to sign a “participation agreement” that gives the online giant the right to withhold payment for up to 90 days if they suspect that the sellers could be causing problems for customers. In this case, however, the time for withholding the money appears to exceed the 90 days, which it would seem might be a little more problematic for Amazon to try to explain away.


The suit states:

“On information and belief, the annual volume of third-party sales equaled or exceeded Inc’s own sales of over $60 billion, which averages out to over $160 million in third-party sales everyday, per day.”

It then  goes on to argue that the plaintiffs believe Amazon is withholding the money intentionally and then investing it in money market funds and other investments. This would potentially allow them to make millions of dollars off of the withheld money.

While there have been grumblings for quite a few years now about Amazon’s practice of withholding money, this may be the point where Amazon actually has to put its cards on the table and come clean about the policy. It should be very interesting in the end to see how this all plays out. I know I’ll be watching.


About our Guest Blogger
This guest post was contributed by Kat Simpson. Kat is a trusted eCommerce author, speaker, educator, and entrepreneur. Kat Simpson has been a successful eCommerce merchant for over 10 years; is an eBay Education Specialist and Gold Level PowerSeller, as well as a successful Amazon merchant. Currently Kat is the hosts the popular weekly eCommerce Podcast That Kat Radio


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