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Nasir and Matt discuss whyAmazon seller accounts are getting suspended and banned without notice and how business owners can rectify this situation through a Corrective Action Plan.
Full Podcast Transcript
NASIR: Welcome to Legally Sound Smart Business.
My name is Nasir Pasha.
MATT: And I’m Matt Staub.
We’re attorneys here with Pasha Law PC, practicing in California, Illinois, New York, and Texas.
Welcome to the podcast!
NASIR: Yeah, and this is where we discuss business in the news and add our legal twist.
Today, we are talking about Amazon.com.
MATT: Never heard of it.
NASIR: And how they’re… No, no, no, it’s a website that sells stuff.
MATT: Okay, eBay.
NASIR: Apparently, all these guys go on there and they sell stuff but Amazon is apparently terminating or suspending some of those sellers’ accounts somewhat arbitrarily – hundreds by the day, apparently.
MATT: Let me just do a quick rundown here of kind of what’s going on.
NASIR: Please do.
MATT: I was just joking, for people maybe listening for the first time.
NASIR: I think they know that you knew what Amazon was but sorry to interrupt you. Literally, yesterday, I was thinking about it because I knew we were going to cover this today. I think it was around 25 different packages from Amazon – no exaggeration – and the reason is because – I think I’ve talked about this last time – we were expecting so we had a whole list of things that we’re buying and we’ve been waiting for a while just to figure out because we’re also moving and we’re like, “Let’s just go ahead and buy it now,” so they all came within 24 hours so I picked it all yesterday. A couple of packages are arriving today still.
MATT: Was that Amazon Prime?
NASIR: Yeah, it was Amazon Prime, two-day shipping.
MATT: Yeah, contemplating getting that myself. We’ll have to talk after this to see.
NASIR: We’ll discuss it afterwards.
MATT: For those who aren’t as familiar with Amazon…
NASIR: Those of you who don’t live on Planet Earth.
MATT: Amazon has thousands of third-party sellers who utilize their marketplace as a storefront – something which I imagine probably have actual storefronts as well but, for the most part, this is mostly eCommerce. And so, some of these small businesses as you alluded to are saying that their accounts are being suspended with little notice and very few options of recourse and what some are calling arbitrary suspensions.
A recent conference for online entrepreneurs and sellers in Seattle pitted the sellers against Amazon with hundreds of vendors and merchants expressing their concern over these suspensions, nothing that they live in fear of being unable to sell on their site, and we’ll get into why that’s an issue here, because you might think, “Well, it’s just one site, why not sell somewhere else – like their own site, for example?” But Amazon, it’s a very impactful site for these businesses.
A recent Wall Street Journal interview, a vice president of Amazon said, “Sellers reporting an average of 50 percent increase in sales from when they joined Amazon’s marketplace and used its storage and shipping services.” Pretty substantial.
NASIR: Yeah, and they’ve made it so easy for sellers to enter into this because, if you think about it, if you have something to sell, not only will they take care of the merchant processing but also the inventory cracking, the shipping, even the storage. In fact, Amazon prefers you to ship your supplies to their fulfillment center so that, as soon as someone purchases it, they can easily ship it. Not only do they make it easy for you, you also get that marketing available that you wouldn’t get if you just had your own website. So, it makes sense.
MATT: Yeah, I think that’s kind of the default spot – one of the default sites – people go to buy something.
NASIR: Yeah.
MATT: These business owners that are affected by this are saying they’re losing hundreds of thousands in sales – which could definitely be the case for some of them – due to these suspensions. What some sellers are having a problem with is they’re getting suspended for things like a customer complaint, an alleged breach of service with Amazon. They feel like there’s no way to defend themselves or prove their innocence.
Really, what’s happening is third-party sellers get suspended, denied, or banned by Amazon each day and so it’s really three different levels. Real quick, suspension means that you’ll have a chance to appeal, you’ll need to work out a plan of action, and so that’s kind of the lowest level or the least suspended even though it’s called suspension.
NASIR: But notice that the first step is not a warning; it’s suspension, right? It goes straight to suspension which is part of the complaint of some of these sellers.
MATT: We’ll get into this later but it’s the thought of guilty until proven innocent almost is how this seems to be, flipped the typical status here. That’s kind of the lowest level.
In the middle, we have denied which, in an account, denied means your appeal was rejected but you still have a chance to submit a revised plan of action and we’ll get into some detail on that as well.
Worst case here is right out banned. Basically, you’re off of the marketplace and either your appeal has failed more than once and, in most cases, Amazon won’t take your calls or even read your emails is what’s being reported here.
This has led to some interest and support from lawyers across the nation as well as internationally. We’re looking to help sellers when they get suspended or have some sort of similar issue with Amazon.
NASIR: Here’s the thing, I’ve seen sellers react in many different ways. Probably the first reaction for those who aren’t familiar with the industry is going to be, “How can Amazon do this?” Just as an example, Amazon will suspend your account and Matt has already talked about a few of the reasons but let’s just say that you get a couple of bad reviews and the bad reviews could be from your competitor. It could be fake reviews. It could be true. It doesn’t really matter, but it could trigger an automatic suspension, depending on whatever Amazon’s triggers are in their algorithm.
Now, your account is suspended. It doesn’t matter if you’ve been with them for years, you have a good reputation, but if you’re doing a ton of business, you have a whole business that’s relying upon Amazon and they terminate you, what do you do?
Some people think that they have a right to be a partner with Amazon, but the reality is that Amazon is not your partner. They’re not. You should not consider Amazon as a selling partner for the very reason that basically they can terminate the contract for any reason whatsoever at their sole discretion.
MATT: Yeah, you can get into some of the specifics of what they call the participation agreement. But, yeah, you’re exactly right and I don’t necessarily view it as a partner. I just viewed it more as a platform which makes sense since they call it the Amazon marketplace. It’s a spot.
Think about it this way, from a brick and mortar store, do you view your landlord as your partner in business? Or do you view it as an opportunity to sell your product? I mean, obviously, it’s not the same, but it’s a similar idea.
NASIR: That’s a good point. It’s as if you have a retail store but, instead of a long-term lease, you have a month-to-month contract that your landlord or you can terminate at any time.
MATT: Yeah.
Let’s jump into this participation agreement which, just to comment on it, it sounds like something you would give a child. Like, “Here’s your participation agreement.” Participation is such a weird word for this.
NASIR: I mean, I also see that when you talk about in-network contracts when it comes to healthcare practitioners. They call it participation agreements. In a way, it’s similar. It’s like you’re joining this Amazon network of sellers. If you want to be part of the club, you have to abide by their rules and you are in the Amazon world. You know, Amazon has a focus on customer service and they feel that the best marketplace is a competitive one which is reasonable and that’s why we, as customers, that’s why I went to Amazon to buy 25 different products – because it is reliable. The shipping is reliable. If I have any issues, I know I can return it. I get what I’m expecting, and with good prices.
But, in order to create that environment, Amazon has become more and more strict, especially as it’s become more competitive amongst sellers to abide by these rules and, besides the participation agreement, they have about twenty other legal agreements including everything from how to set your fees, product guidelines, how you market, everything from IRS reporting, tax calculations, all that stuff is in there and it’s quite a mess if you really want to dive deep into it.
MATT: Yeah. I mean, from a consumer’s perspective, it’s pretty nice, other than the fact that at least in my neighborhood the Amazon van that drives around us cannot figure out that there’s other vehicles on the road and just will drive any time anywhere.
NASIR: Is it an actual Amazon van or UPS?
MATT: It is. There’s one that drives around, it’s just a white van with an Amazon sticker on the side of it.
NASIR: A little sidebar here, last night, as I get 25 different packages, it came at regular hours to UPS. But then, at like 7:30, I get a call and the caller ID says Amazon Prime and then I’m like, “Okay, I’ll answer it.” Apparently, it was like regular Amazon driver that was delivering one of the packages and I’m like, “Why is this not going through UPS?” and they’re like, “Oh, well, I’m an independent contractor delivering for Amazon.” Something like that. I thought that was interesting. Maybe you knew that already but I didn’t know that.
MATT: Makes sense.
NASIR: I guess they have their own private contracting delivery force as well.
MATT: Yeah. So, let’s explain why Amazon is able to do this. You really don’t have to look much further than the vague language in their participation agreement which is perfectly acceptable because people want to sell there. But a couple of clauses in particular, there’s something about reservation of rights and then their termination clause. In a couple of excerpts here, Amazon retains the right in our sole discretion to withhold for investigation, refuse to process, restrict shipping destinations or stop and/or cancel any of your transaction, stop and/or cancel orders of your products if we ask you to do so.
NASIR: Simon says, you do it.
MATT: To couple with that is their termination at its sole discretion. They terminate this participation agreement, access to the site or the services, or any current fixed price sales immediately without notice or any reason. Also, in its sole discretion, may prohibit sellers from listing items for fixed price sales.
If you’ve ever read the terms of service for a site, it’s not uncommon to see something similar – that the site owner can terminate access or whatever it’s providing for any reason without notice. I would assume most sellers probably don’t read this participation agreement. If they do, they just don’t really care because they understand that they can have significantly more sales if they sell through Amazon’s marketplace.
NASIR: Maybe some do but I think maybe not the participation agreement. They probably read the guidelines.
MATT: Yeah.
NASIR: At least, if you’re a seller, you need to read their rules. If you don’t abide by their rules – and they can be tricky. You can get suspended if you send an email to one of the persons that bought your product and tried to sell them on something else or you tried to divert them to, “Oh, you like this product? I sell fishbowls. If you want to buy a bunch of different fishbowls or different fish gear, go to fishbowls.com,” which I own, by the way – no, I don’t. But directing them away from Amazon.com could also be a violation. In fact, it is a violation of their terms and you can easily get suspended for that. But it may be as benign as that and so, of course, you need at least to understand the rules. You know, you don’t need to read the legalese of this participation agreement, I suppose.
MATT: Right. You actually own fishbowls.pizza, of course.
NASIR: Yeah, pizza, of course, exactly.
MATT: You just kind of mentioned previously as well these community rules for Amazon for both consumers and sellers. It really boils down to a couple of major ones. Honor your commitment to buy or sell – that’s pretty obvious and should be how anyone conducts business. Maintain current account information – ditto. If your privileges to sell have been removed, to not open a new selling account – that one’s probably not as obvious for a seller. I think the first thing somebody would do, let’s say your account gets suspended…
NASIR: Or banned.
MATT: One of two things, try to figure out a way to fix it and/or open up a new account. That might not come as so obvious. And then, do not misrepresent yourself. I mean, that’s just breaking the law – misrepresentations.
NASIR: Yeah, just a general rule in general. But, actually, Amazon is pretty tricky when it comes to creating a new account. I mean, they track bank accounts, your IP address, your actual mailing address, street address that you provide them. I’m not advocating this but, if you need to create a new seller’s account and you have been banned, it requires working in a completely different location, working through a different entity that is not associated with yourself, different phone number, different IP address that you log in to access your Amazon seller account which I’ve heard people use virtual private networks just to access because they’ve been banned and so they’re going into a different account.
Like I said, once you’ve been banned, it’s kind of it. sometimes, it’s not necessarily the seller’s fault. It could be just by mistake or something that they weren’t able to appeal, they didn’t consult a lawyer perhaps to figure out a way to get out of that situation properly.
MATT: Yeah, exactly. You know, Amazon is pretty straightforward. It says violations of our participation agreement – which those rules I just read are part of it – can result in removal of your selling privileges.
What are the kind of main things that can result in a seller’s either being suspended or banned? It boils down to a couple of categories here. Poor performance, violation of policies, or restricted products which restricted products are probably things you would expect more or less.
NASIR: Yeah, of course, but also it can be what they consider counterfeit stuff, too.
MATT: Yeah.
NASIR: That can get tricky because a lot of people now buy stuff from Alibaba or buy it wholesale. Sometimes, even the sellers may not know that it’s counterfeit. I had a personal experience with a client that the DVDs that they were selling were technically counterfeit but, if you look at them, the box, the DVD, they were perfect copies. Even the inspector, the only way they actually know is by through some substantial testing and we’ve seen documentaries how, in China, the counterfeit iPhones that they sell are not really counterfeit because they’re using the same kind of supplies and manufacturing techniques that they use to make iPhones in China. And so, it can be a mistake but once it’s reported as counterfeit, it may become an automatic ban.
MATT: Yeah, it reminds me of earlier this week I paid with something with a ten-dollar bill and the cashier took it and was examining it. I was like, “Well, as far as I know, it’s legitimate.” It’s a place I go all the time. He’s like, “Well, I know where to go to if it’s not.”
NASIR: I’ve never seen people check ten-dollar bills. Ten dollars is still a lot of money.
MATT: He said it felt weird and then he gave it to me. I was like, “I guess it does feel a little weird,” but it looked legit. I think it was just very new. Maybe, I don’t know. You don’t see a lot of ten-dollar bills. There’s not a lot of them out there.
NASIR: That’s true. A lot of cashiers run out of ten-dollar bills quickly. Little known fact.
MATT: A tip for business owners out there.
NASIR: Store extra ten-dollar bills, exactly. I’m sure they already know that without us telling them.
MATT: We mentioned a few but just to hand on these quickly or a few items real quick. In addition to some of the things we already brought up, you just brought up the counterfeit things, you know, trying to divert transactions or buyers in any way; inappropriate email communications – you touched on that; having multiple seller accounts, we mentioned that, that’s a big no-no; manipulating rankings which is pretty interesting – that’s a little bit more complex, I suppose, but that’s another thing that can get you banned.
NASIR: Yeah, and you can do that by manipulating your prices. They’ll even ding you possibly if you start selling your product at a very low price, they may even just assume that you’re selling something counterfeit because there’s no way you can sell this for that amount of money based upon what we know of that product unless it’s a stolen item or if it’s counterfeit because, otherwise, you won’t make any money. And so, if you think about it, I’ve even heard that now, if you want to sell certain products – a good example is if you want to sell a Samsung charger or a Samsung battery replacement or whatever it is, some kind of brand – you actually have to show Amazon proof by showing some kind of invoice that you are buying from the manufacturer. Not only that, you may actually have to pay a fee – like $1,500 – to have the right to do that which is a little off-putting to some sellers because some sellers in Amazon, what they do is they find deals, they find ways to license real products at a lower rate. For example, they’ll buy inventory of a closed down store and they’re all genuine products but, in order to sell some of those products, Amazon won’t allow you unless you get proof that somehow these are actually genuine products.
MATT: It’s interesting because I don’t think this would fall under predatory pricing where the typical old school way of undercutting your competitors to get them out of the market. This is just to get people to buy it and maybe get favorable reviews. We know how the law works with technology and the evolution of how long it’ll take to get that built into being illegal or being an issue. But it’s an interesting component.
I know you have your fishbowl company running, fishbowls.pizza, and you sell on Amazon marketplace. Let’s say you get no notice. You just get your account suspended. What are the steps you’re going to take in order to fix this problem?
NASIR: First things first, I would panic. Usually, I say that as a joke but I’m kind of serious because, once you receive that suspension, it’s really bad news and so you only have one – maybe two – good shot to try to get your account back. And so, really, the first thing to determine is why were your selling privileges removed. We went through the different rules and so forth. See what it was. It may be something like we’ve talked about – something that may not have been your fault and we’ll talk about exactly what to do but, in the notice itself, it should describe or give you an idea what the reason is. At that point, I believe there’s some way to communicate. As a seller, you have a dedicated sellers’ line that you can call for questions and so forth but, once you get suspended, they will not take any communications besides email. That is their policy and it’s just how they work. That’s the first step – figure out why you were suspended.
MATT: In order to solve the problem, you have to figure out what the problem is. That should be pretty straightforward. In doing this, I guess if you’re selling a lot, this probably isn’t the issue, but if you review your metrics of what you’re selling, maybe it is a performance issue. Maybe, based on poor performance, Amazon is saying you violated their policy and that’s the reason behind this suspension or ban – whatever it ends up being.
NASIR: Yeah. And so, depending upon what the actual reason is how you kind of react. But I’ll tell you how not to react, at least. Even if you think you did nothing wrong, remember that this is Amazon’s world. You are working within their universe. And so, it kind of doesn’t really matter whether you are right or wrong. It kind of sucks in that respect but, because they have all the bargaining power, it’s up to you to convince them to take you back on. And so, from their perspective, Amazon is like, “All we care about is a good customer experience.”
A perfect transaction is such that Nasir Pasha buys something from Amazon, it gets delivered to his house, and we don’t hear from him again unless it’s on a podcast. That’s a perfect world. If I complain that the shipment was late or if the package was damaged or what-have-you, that is not a smooth transaction. Accordingly, Amazon, most of the time, their expectation from you to get your account back is some kind of corrective action plan. They want to know what remedial action are you going to take in order to fix and prevent the problem from ever occurring again. It sounds simple but you have to be persuasive and we’ve actually found that doing a formalized corrective action plan actually is very helpful. If you can get that on an attorney’s letterhead, even better.
MATT: I think it’s more than just helpful. It seems like it’s the only thing you can do to correct the problem.
NASIR: You’re right. I have not known anyone that’s been able to say, “Hey, Amazon! You made a mistake. I didn’t really do this. I have proof that this customer got his product and I know when I packed the product it was fine.” I have not seen Amazon have a positive reaction to that.
MATT: What you said is exactly right. Take responsibility. We already said the first steps. Figure out what you did wrong and how you’re going to correct it but take responsibility for that. Don’t blame or criticize Amazon to any extent and then explain how you have corrected the issue and, like you said, do it in a formal process. That’s really the way to go about it. It’s kind of the saying, you know, “The customer is always right.” It’s kind of like that.
NASIR: Amazon is always right, right?
MATT: Yeah, not reversed but it’s a convoluted triangle of whatever.
NASIR: It’s true. I mean, Amazon is practically your customer and you have to satisfy them. We’ve had people contact us saying they want to sue Amazon because of this stuff. I personally haven’t been able to find a viable legal theory and maybe it’s out there. But, in general, it’s like Amazon told you the rules. These are the rules. Even if we don’t like your face, we can terminate for any reason at our sole discretion of our interpretation and we don’t have any obligation. Being an Amazon seller is not a right. And so, you know, we can terminate this contract any time. According to those rules, if they terminate the contract, you can’t force them. If they don’t pay you what you’re owed and things like that but the reality is that, once you’re terminated, you are given what you’re owed right away except that there’s this nuance that I guess if you have seller credits through Amazon, you may lose that, if it’s not real money but that’s a different issue. But the point being is that they make a very smooth split once this happens.
MATT: Right, and unless they made one of those kind of mistakes that you just mentioned – not mistakes but let’s say they did something wrong where they were supposed to do something – all it is is they’re terminating their agreement with you which they are perfectly entitled to do with no notice for any reason. Unfortunately, for you, as the business owner, I don’t know how you’re going to sue for breach of contract. There’s always a creative thing that somebody can come up with but it’s not your typical resolution process when you feel like you’ve been slighted.
NASIR: At the same time, we’re talking about this and I’m kind of painting a bleak picture because I just want everyone to understand that once you go through this and those of you that are listening that are Amazon sellers or are thinking about getting into it or actually have gone through it, the odds are stacked against you. And so, at this point, if you have a profitable business prior to the suspension, it’s a matter of “I need to take this seriously. I can’t just shoot off an email that’ll count as your appeal.” You don’t want to do that. You don’t want to rely upon that second appeal either. Generally, like we talked about, you get an appeal and then it’s denied. This is our understanding. You still have a chance to submit a revised plan of action but I wouldn’t necessarily rely on that because, again, it’s up to Amazon. Their policies can change at any time. The past year alone, they’ve become more and more strict. People get banned – suspended and banned – every single day. Just search Amazon forums, you’ll see it all.
MATT: Yeah, I have to imagine a common thing would be business owner’s account get suspended, they see this opportunity to appeal, throw something together in five minutes in an email, there might be a second opportunity but you’ve missed that first chance just because you didn’t put any thought into it because you just think. “Well, this isn’t fair. They screwed this up.” I bet a lot of people go on the attack as well which everything I just mentioned are things you don’t want to do.
NASIR: That’s right. I think I’m going to stop selling counterfeit fishbowls. What do you think?
MATT: I guess a fishbowl would be branded.
NASIR: But, yeah, they’re actually not fishbowls or aquariums. They’re actually terrariums. Technically, counterfeit. But, yeah, I think that’s good. Thanks for joining us.
MATT: Yeah, keep it sound and keep it smart.
