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Amazon Business Solutions Agreement Allowing Confiscation of Seller Funds Held Unenforceable

Washington Arbitrator rules section 2 of Amazon’s Business Solutions Agreement, allowing Amazon to indefinitely withhold funds in its discretion in cases of alleged product inauthenticity is an adhesion contract and not enforceable.

Seattle, Washington, United States – WEBWIRE – Wednesday, January 20, 2021

Arbitration awards are generally not citeable as precedent, but this award is a great victory for sellers, who have had millions of dollars in funds withheld and confiscated by Amazon with little or no evidence

In an arbitration against Amazon.com, LLC brought by Mobile Galaxy, LLC, the arbitrator struck down a provision of Amazon’s Business Solutions Agreement as a contract of adhesion, which, the arbitrator ruled, was subject to Washington law providing that all contracts were subject to interpretation under the implied covenant of good faith and fair dealing.

Mobile Galaxy was a third-party seller under Amazon’s Fulfillment by Amazon (FBA) program, whereby third-party sellers deliver their inventory to Amazon, which takes the responsibility of storage, shipping and delivery of the inventory for fees. The provision in question, section 2, purports to allow Amazon to confiscate funds if, in their discretion, the seller’s account has been used to engage in deceptive, fraudulent, or illegal activity, or to repeatedly violate Amazon’s policies.

Amazon deactivated the seller’s account because of complaints received by customers about the condition of the seller’s products sold on Amazon, and held on to over $93,000 in proceeds, claiming the right to do so indefinitely under the Business Solutions Agreement and, alternatively, as liquidated damages.

The arbitrator held the contract was a contract of adhesion, in that it was not subject to negotiation. He ruled that sellers on Amazon are left with the Hobsin’s choice of “take it or leave it,” and that the contract allowed Amazon to keep all revenues whether legitimate or not, and was, therefore, an unenforceable penalty clause and that Amazon had retained and planned to use the sales proceeds for its own purposes. He ruled that Amazon had not proven it had been damaged by the seller and had no right to retain the seller’s sale proceeds.

“Arbitration awards are generally not citeable as precedent, but this award is a great victory for sellers, who have had millions of dollars in funds withheld and confiscated by Amazon with little or no evidence,” said Kenneth Eade, Mobile Galaxy’s attorney.