Five Lessons Learned from Amazon Arbitration

January 29th, 2020

When you’ve been in arbitration as much as we have, you’ve seen a few potholes along the way. And while drawing obscene gestures around real-life potholes may get them filled faster, we’d rather just tell you about the ones we’ve seen before you hit them. Here are five lessons that we’ve learned from Amazon arbitration.

1. Claims against Amazon are almost always subject to arbitration. 

Based on the most recent case law, almost any claim against Amazon or its subsidiaries will be covered by a forced arbitration clause. The only exception is an intellectual property infringement claim, such as a copyright, trademark, or patent claim. Additionally, by entering into a business relationship with Amazon, you waive your right to a class action or a jury trial. 

2. All claims must be brought in the State of Washington. 

Amazon’s agreements contain a forum selection clause stating that all claims must be brought under Washington law and in the State of Washington. In most cases, the US Supreme Court has supported forum selection clauses like Amazon’s except under extraordinary circumstances. 

3. Amazon can terminate your account at any time.  

Amazon Services Business Solutions Agreement allows either party, including Amazon, to terminate the agreement at any time: “We may terminate or suspend this Agreement or any Service for any reason at any time by notice to you. You may terminate or suspend this Agreement or any Service for any reason at any time by the means then specified by Amazon.”  

Since Amazon can terminate your account at any time, it takes the position that its contracts are “at-will” and that it has no duty to reinstate a suspended account, even if Amazon is wrong. Washington case law, in many cases, seems to support Amazon’s position, and both the Western District of Washington and the Ninth Circuit have upheld this at-will provision in cases involving Amazon in the past. 

4. Your remedies against Amazon may be limited. 

When arbitrating claims against Amazon, you may be limited in the amounts or types of damages that you can recover. The limitation of liability clause in the Amazon Services Business Solutions Agreement says that Amazon is not liable for any cost of cover, recovery, or recoupment “of any investment made by you or your affiliates in connection with this agreement, or for any loss of profit, revenue, business, or data or punitive or consequential damages….” Instead, Amazon limits its liability to “the total amounts during the prior six-month period paid by you to Amazon….” 

Though there are exceptions to limitation of liability clauses, in arbitration, Amazon argues that it cannot be held liable for your loss of sales, loss of profits, or other damages. 

5. Amazon can dispose of your inventory and charge you for it. 

Amazon’s agreements call seller inventory “Units.” Under its agreements, Amazon reserves the right to dispose of “Unsuitable Unit(s).” Unsuitable Units are defined as those that are unfit for a particular purpose, lacking labels, lacking properly registered labels, or that Amazon determines is otherwise unsuitable. Amazon can dispose of these units where it believes that the unit creates a safety, health, or liability risk to Amazon or any third party, where the seller has engaged in fraudulent or illegal activity, where Amazon has cause to terminate a seller’s services, where a seller fails to direct Amazon to return or dispose of units within 30 days after being notified that removal is required. Though it is unclear what “disposal” means, it appears to mean either destruction or liquidation sale by Amazon.  

If Amazon disposes of units, it may charge a seller a disposal fee. It may also retain any money that it receives from the sale of the “disposed” units. This means that, if your seller account is suspended, Amazon may determine that it has the right to dispose of your inventory and keep the money that it receives from doing so. 

These are just a few of the potholes that we’ve encountered in our travels with Amazon. And, of course, we’ve also had a number of successes along our journeys. If you want to learn more, or if you just want to trade war stories, come see us at Booth #127.