EcommerceBytes-NewsFlash, Number 3024 - March 19, 2013     1 of 5

Sellers Sue Amazon over Payment Holds

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Third-party sellers on Amazon and eBay are different in many ways in terms of size, location and the types of items they sell, but they all have at least one thing in common: when they ship an item, they want to be paid quickly. After all, they must pay for the shipping outlay as well as all their other expenses.

So when marketplaces place holds on payments, whether its Amazon or eBay's PayPal payments service, it puts a squeeze on sellers.

eBay sellers sued PayPal over its payment holds and eventually settled, and now it's Amazon's turn to face sellers' wrath.

Two Amazon sellers filed a class action lawsuit against Amazon Services LLC on Friday for its payment hold practices. Jo Ellen Peters of Kentucky and Ken Lane of Texas allege that Amazon routinely holds payments for longer than permitted by its own Participation Agreement, and for longer than permitted by Washington law.

"Moreover," according to the complaint, "on a routine basis, Defendant (Amazon) suspends or cancels accounts, and places holds on sellers' funds. While Amazon contends to have the contractual basis, in some instances, for holding the funds for 90 days, Amazon routinely holds funds beyond the contractual period, often well in excess of 90 days."

Friday's complaint against Amazon says the marketplace contract is provided on a take it or leave it basis. "There is a tremendous disparity in bargaining power, as a predominant portion of members of the Class must be able to accept payment via Amazon in order to sell goods on the Amazon.com website."

The plaintiffs allege that the scale of Amazon's practice regarding payment holds makes it "lucrative" thanks to the fact that "Amazon keeps the interest and other gains generated by the funds owed to Plaintiffs and the Class and utilizes the available cash in its business."

The sellers go on to allege that, "By holding on to this daily cash flow for only a few days or weeks, Amazon is able to invest this money in money market funds, marketable securities and other investments, and utilize the cash as working capital in the operation of its business. On information and belief, Amazon has reaped and continues to reap many tens of millions of dollars annually from this practice."

The complaint also alleged that "Numerous articles, web posts, blogs, and other online sources reveal widespread complaints about Amazon's practice of holding sellers' funds. Numerous complaints have been filed with the Washington Attorney General's Office about Amazon's business practice and a substantial number of those complaints relate to lengthy and improper holds on seller funds by Amazon."

The Seattle Times, which wrote about the lawsuit on Friday, said the Washington state Attorney General's office had received about 120 complaints in three years from Amazon sellers who accused the company of arbitrarily withholding their payments.

Amazon.com spokesperson Erik Fairleigh told EcommerceBytes the company would not be releasing comment. "We have a longstanding policy not to comment on active litigation," he said.


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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