Dealing with Common Amazon Seller Legal Issues

New Jersey Law Journal August 29, 2022

By Jonathan Bick   Jonathan Bick is counsel at Brach Eichler in Roseland, and chairman of the firm’s Patent, Intellectual Property & Information Technology group. He is also an adjunct professor at Pace and Rutgers law schools.

A variety of legal difficulties have arisen for Amazon sellers.  These difficulties appear to be novel because of the e-commerce element. However, most difficulties including those related to taxes, seller account suspensions, intellectual property and customer data access may be properly and timely promptly addressed using traditional technological, business, and legal techniques.

Amazon seller status arises upon successfully registering with Amazon as a provider of goods or services. Creating an individual Amazon seller account is free. Using it requires the payments of various fees to Amazon. Amazon sellers differ from Amazon vendors. More specifically, Amazon sellers price and market their products themselves. Amazon vendors sell their products to Amazon-employed buyers, who then list and resell the products to Amazon users.

Amazon discloses what a user must agree to and abide by in order to access and use the Amazon Internet site to sell goods. This disclosure is  terms of use agreement, namely, the “Amazon Services Business Solutions Agreement.” This Agreement which includes a suite of documents is supplemented a “Best Practices” guideline for its sellers. While Amazon sellers are compelled to run their Amazon sales, the Amazon way, Amazon sellers are not obligated to use Amazon recommended procedures rather than traditional legal, business and technological solutions to address Amazon related legal difficulties.

Among the most common legal issues is related to Amazon sellers’ state and local sales tax collections and remittances. Sales tax collection obligations depend upon the Amazon seller’s location and transactions. Consequently, some transactions may be taxed, while others may not be.

A traditional business solution is to change the transaction such that sales tax is not applicable. For example, if the Amazon seller’s offices, people and assets are not located in a buyer’s jurisdiction, then by changing the business terms of the sale to Freight On Board  (seller's city), then the risk of loss is on the buyer and the Amazon seller’s sale tax obligations are extinguished and the buyer’s use tax obligations arise. This solution may be supplemented with technology whereby a software filter will eliminate sales where transactions will result in sales tax obligations.

A traditional legal solution is to incorporate Amazon into the transaction (via contract) and thereby shift the sales tax collection and remittance obligations from the Amazon seller to Amazon. For example, when an Amazon seller contracts to participate in the Amazon marketplace facilitator program, thereby making Amazon responsible to calculate, collect, remit, and refund state sales tax on sales sold by Amazon sellers.

Another common problem for Amazon sellers is the suspension of their Amazon account. The traditional business option is to negotiate with Amazon to have the account un-suspended. This process has been simplified due to the availability of an Amazon Internet suspension appeal application. However, this application is only available 17 days after receiving the notice of suspension

A traditional legal solution is to initiate litigation. A more cost effective traditional legal action is arbitration. The contract between Amazon and Sellers gives Sellers the right to demand arbitration of their disputes.

Since the primary causes of account suspension are poor performance, policy violations, sale of restricted products and owning and using multiple seller accounts, traditional technology solutions are available depending upon the cause. For example, if poor performance is an issue the implementation of the software filter which eliminates poor performing product (i.e. those which cause Amazon to receive complaints) from the Amazon seller’s Internet site. More specifically, the software filter is designed to ensure that Amazon’s seller account transactions do not result in outcomes which violate Amazon criteria ( such as: Negative feedback <5%; Order defect rate <1%; Pre-fulfillment cancel rate <2.5% and Late shipment rate <4%)

Similar software may be used to eliminate products which are associated with product safety (Amazon policies bar selling unsafe products) and restricted products. Traditional technological options are often combined with traditional business options. For example, the disclosure of the implementation of a technological option may be a significant action plan element when implementing the business option of filing an account suspension appeal.

Amazon sellers are often faced with intellectual property issues. Among the most common is Amazon’s requirement that Amazon sellers acquire trademark protection before admission into its Brand Registry program. The program unlocks many important tools for Amazon sellers including enhanced brand content, advertising options, and intellectual property enforcement. This difficulty is easily surmounted by the traditional legal technique of registering trademarks with the United States Trademark Office (which may be done using the www.uspto.gov Internet site).

However, some Amazon seller intellectual property difficulties are best resolved using traditional business means. For example, listing hijacking is most especially a problem for Amazon private label sellers because they sell unique good and thereby depend on owning their own listing and buy box and often lose both sales and ratings when a rival delivers inferior products. In this instance the traditional recourse available to private label sellers is filing a grievance with  Amazon.

Despite that fact that Amazon sellers list price and market their products themselves, their access to customer data is limited. Amazon sellers are only permitted one message to their customer per sale. This message transaction must be done within the Amazon platform and content is closely regulated. Amazon sellers do not gain access to customer’s e-mail or payment information.

Amazon sellers generally cannot access their customer information like the full name and address, let alone contact them. Amazon sellers that fulfill their orders have access to customer details, but those that use Fulfillment by Amazon (FBA) - the vast majority of Amazon sellers - do not.

The traditional business method for securing more customer data in this instance is to repurpose data. For example, Amazon must give customer data to Amazon sellers to allow them to implement sales tax remittance. The content of this Amazon report, such as Amazon-Fulfilled Shipments data, is intended for fulfilling tax obligations though it may be repurposed for marketing purposes.

A traditional technological solution to securing customer information is employing transaction capture software. This allows Amazon sellers to secure all the customer information associated with sales on their Internet website, including demographics and email addresses of their shoppers.

Finally, traditional litigation may allow Amazon sellers to secure customer information from Amazon. Amazon does not disclose customer information in response to Amazon seller  demands unless required to do so to comply with a legally valid and binding order.