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How to Sue Amazon as a Seller [Guide 2022]

Updated July 25th 2022

5 min read

Sue Amazon as a seller in small claims court.

How to Sue Amazon as a Seller [Guide 2022]

How to Sue Amazon as a Seller [Guide 2022]

author

Kaylin Lo

Author


Dispute is the easiest & most accurate small claims platform with affordable ways to resolve every dispute.

Suing Amazon as a Seller

Third-party sellers can experience some serious issues if their account is suspended or shut down by Amazon. That's because they'll start losing a lot of sales, and that could cut into their livelihood or even bankrupt them. However, having legal recourse against such a large company isn't always easy.

When you sign up as a third-party seller with Amazon, you agree to the terms of service for that particular business relationship. Amazon's Business Solutions Agreement is the official name for the document, and it details all the terms and conditions for interactions between the company and your business.

One of the biggest problems for sellers on Amazon, is that the agreement you're now part of limits you to the remedy of arbitration. In short, you can't sue Amazon, because you agreed not to when you signed up as a seller on their site. Instead, you can demand arbitration. This is much like a private court, and a judge or attorney will be appointed to decide the case.

Arbitration

The arbitration can be conducted over the phone, because Amazon's headquarters is in King County, Washington. For third-party sellers who aren't in the local area, having arbitration over the phone saves them significant time and travel expenses. But arbitration isn't free, and you could end up paying $7,500 to $10,000 or even more to make your case.

How long does it take to sue Amazon?

It can also be a few months before you can get an arbitration appointment, during which time you won't be able to conduct business if Amazon has shut down or suspended your account. Still, it can take years to bring a lawsuit to court, so the arbitration arrangement is actually much faster. If your account was shut down and the arbitrator finds in your favor, you can be back up and operating relatively quickly.

What is an “at will” agreement?

Among the downsides of the Amazon agreement with its third-party sellers, is that the agreement is "at will." That means Amazon has the right to stop working with a seller or allowing that seller to use their platform at any time, for any reason, or for no reason at all. The law is in Amazon's favor on all of these points, and also on the lost revenue you may experience during the time your store is shut down.

So, why would a seller even consider suing Amazon? The main reason is to try to recover outstanding proceeds from your sales, which Amazon claims they have the right to permanently withhold from you. The law in this area, though, isn't on the big retailer's side. The company often tries to hold proceeds indefinitely, claiming that buyers might seek refunds for counterfeit products or other reasons.

Because the purchase agreement is between you as the seller and the buyer of the goods, though, the courts generally rule that Amazon cannot indefinitely hold the proceeds of the sales you made during your time as a seller on their platform. You may need to retain an attorney and go to court to receive these proceeds, though, and you'll need to weigh the costs of doing all of that against the amount Amazon is withholding from you in order to decide if it's worth it.

Filing a Small Claim Against Amazon

If you feel like you have a case, the next step is to file. You can file a small claim with Dispute completely on your own, and hassle-free.

Here is a list of necessary next steps to file.

Send a Demand Letter

Sending a demand letter is an essential step of before small claims court proceedings. It is also known as a notice of intent to sue, and it should be sent before filing in court. Many cases are resolved through strongly worded demand letters. It is advisable to send the letter on professional letterhead. If you use Dispute's services, you can choose what package you’d like to generate a demand letter. You can generate a letter on your own, or schedule an intake call with an agent and we’ll handle the rest. Once you've decided what to include in your letter, simply click 'Send' at our website and we will print and mail your letter for you.

After sending your demand letter, you’ll want to file a statement of claim. This is the official state small claims form. For this form, you'll need the following information:

  1. The courthouse you’d like to file in
  2. Reason for the lawsuit
  3. Claim amount ($)
  4. Name and address of the person/business that is being sued

If you are suing a business, you need to look up the certificate of doing business. Make sure you fill out the form corresponding to the county where the defendant lives, works or does business.

These forms can get tricky, and mistakes prevent your case from filing. So doing research is essential. Experts at Dispute file paperwork daily, and a full support team can help you find answers to your questions. Check out our package options for filing with us - you can choose different services based on your budget and needs.

If there are no errors, you'll get your documents back with a date for the hearing.

Serve the Defendant

Once your claim has been approved by the court, you’ll have to notify the defendant that you’re suing them. Different courthouses have different regulations regarding defendant service. Some require service through mail, while you may need to find a private process server for others.

Some courts require the defendant to “answer” the claim. Check your courthouse’s rules - you may not receive a date for trial unless the defendant files additional paperwork.

But if not, you’re ready for your day in court.

Preparing for Court

There are a few steps you can take when preparing for your day in court.

  1. Gather evidence
  2. Prepare witnesses, if you have any
  3. Dress appropriately
  4. Show up on time

Can you sue Amazon for closing an account?

Sellers aren't able to sue Amazon for closing an account, and neither are buyers. That's because of the language in Amazon's terms of service, which states that the company can close accounts for any reason or no reason at all, at will. If you feel you've had an account closed wrongly, or in retaliation for something, and you want to try to get it reopened, you can seek out arbitration. In some cases, Amazon may reopen the account. But because it's "at will," they aren't under any obligation to do so.

Sellers who sue to have accounts reopened aren't often successful, as Amazon generally closes accounts that they feel are in violation of their terms of service. They may also close accounts with a lot of complaints or poor ratings. You can always ask for reconsideration, but don't have legal recourse to sue for a closed account.

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