Amazon Arbitration for Third-Party Sellers [A Comprehensive Guide]

*Update: Amazon already changed its Terms of Service to allow customers to file lawsuits instead of being limited to arbitration.

If you’ve ever had your Amazon account suspended or had waited for weeks to learn about the status of your inventory to no avail, you might have gotten a strong urge to take Amazon to court.

Unfortunately, you can’t.

Because you agreed not to.

If you’re one of the many Amazon sellers who were too focused on getting more sales without reading the fine print, I’ve put together this comprehensive guide to Amazon arbitration so you’ll know what to do when legal issues arise.

This guide will answer the following questions and more:

• Is there a way that I can take Amazon to court?
• What is arbitration and how do I commence one against Amazon?
• How much will it cost?

Before we proceed, let me preface this by saying that we are not lawyers nor are we experts in arbitration proceedings. This article is the result of our research. Should you find yourself in a situation where you need to go after Amazon, we highly advise you to seek the help of a lawyer.

Arbitration vs. Judicial Proceedings

Why would Amazon choose arbitration over court actions? Is this choice advantageous to you as a seller?

Arbitration is a kind of alternative dispute resolution. This means that it’s a process done outside of court that helps parties resolve their disputes. It’s generally faster and cheaper compared to judicial proceedings.

When it comes to arbitration involving Amazon, the rules of the American Arbitration Association (AAA) are followed.

Unlike judicial proceedings, you won’t be dealing with a judge or jury in arbitration. Instead, an arbitrator or a set of arbitrators will be handling your dispute.

An arbitrator under the AAA can be any of the following:

• Former federal and state judges
• Attorneys with exceptional subject-matter expertise
• Professionals who understand the essence of the dispute

The AAA has a National Roster of Arbitrators from which arbitrators are chosen. Parties can generally agree on who their arbitrator(s) will be and how many. In fact, according to the AAA rules, parties can choose arbitrators who are not impartial to their dispute.

Just like a judge’s ruling, decisions made by arbitrators are final. There are cases where a court can review arbitration awards, but these are limited.

Another important difference between the two is that while arbitrators are given wide discretion about the acceptability of evidence presented, judges have to follow rules on evidence.

Arbitration with Amazon is binding. Thus, arbitral decisions should be followed and respected by all parties.

Can You Sue Amazon?

By agreeing to Amazon’s Business Solution Agreement, you’ve agreed that “any dispute with Amazon or its Affiliates or claim relating in any way to this Agreement or your use of the Services will be resolved by binding arbitration . . . rather than in court. . .”

So in general, whatever problems you have with Amazon should be dealt with in arbitration rather than in a judicial proceeding.

However, this doesn’t mean that you can’t absolutely take Amazon to court.

You can still take Amazon to court in the following cases:

1. When your case qualifies for small claims
2. When your case involves problems relating to infringement and misuse of intellectual property rights

Making the Decision: Should You Pursue Arbitration with Amazon?

Before sending a demand for arbitration to Amazon, you need to consider the following:

Ripeness of action

• Just because Amazon made a mistake regarding your account or inventory doesn’t mean you can immediately take them to arbitration. For example, if your account is suspended, the first step to take is to write to Seller Performance and draft a Plan of Action (POA), not initiate arbitration immediately.

Fees and cost of arbitration

• Unless you’re doing it out of pure spite and frustration, if your claims are lower than the overall costs of the arbitration, then it would make no financial sense to pursue it. We’ll discuss the fees and costs in a later section.

Strength of your case

• Have you violated any of Amazon’s policies? Were you selling a prohibited or restricted product? If you were clearly in the wrong, then filing for arbitration is fighting a losing battle.

How to Initiate Arbitration with Amazon

Before you can begin an arbitration proceeding as a seller, you should send a letter requesting arbitration and describing your claim to their registered agent, CSC Services of Nevada, Inc., 112 N Curry Street, Carson City, NV 89703.

AAA, on the other hand, requires the initiating party (you) to submit a dispute in either of two ways:

1. Through the AAA webfile or
2. By filing the complete demand with any AAA office

However, under your agreement with Amazon, a forum has already been selected, and that is the State of Washington. This is because Amazon’s agreements define “Governing Courts” as the state or federal courts in King County, Washington and “Governing Laws” as the laws of the State of Washington.

Submissions to the AAA may be done via mail, fax, email, or online.

For online filing, visit their website and click on “File or Access Your Case.”

You will then be asked to fill out a form and attach the necessary documents.If you wish to file via mail, send the requirements along with the filing fees to AAA Case Filing Services, 1101 Laurel Oak Road, Suite 100, Voorhees, NJ 08043.

For fax filing, send the initial documents and a charge card authorization form for the filing fee through 877-304-8457.

For filing through email, send the filing documents along with a check or a completed charge card authorization form for the filing fee to CaseFiling@adr.org.

Make sure that your requirements are complete because if not, your case will not be considered filed. Why is this important?

If you’ve submitted incomplete documents, the AAA will

• Acknowledge to all named parties the receipt of the incomplete filing
• Inform parties of the deficiencies
• Set a date as to when the deficiencies should be cured

If not completed within the specified time, the documents may be returned to the initiating party.

Amazon Arbitration Fees and Costs

There are many fees associated with arbitration, which is why cost is one of the most important factors to consider. The filing fee alone is at least $1,725. Along with legal and administrative fees, expect to pay around $5,000 and more just to get a binding decision.

The different expenses are outlined below.

Filing Fees

The filing fees will vary depending on whether the case is international or not. As defined by the AAA, an international case could either be

• One where the place of arbitration or performance of the agreement occurred outside the United States or
• If the parties are from different countries

The claimant may choose either the standard or the flexible fee schedules as outlined in the tables below.

Standard Fee Schedule (Non-International Cases)

Flexible Fee Schedule (Non-International Cases)

 

Standard Fee Schedule (International Cases)

Flexible Fee Schedule (International Cases)

Standard vs. Flexible Fee Schedule

	Standard	Flexible
Number of Payments	2	3
Proceed Fees	Absent	Present
Minimum Amount of Claim	None	$150,000
When Arbitrator Is Selected	After payment of initial filing fee	After payment of Proceed Fee

They also differ in terms of refund in proper cases. This is discussed in detail in the next section.

Lawyers’ Fees

Do you need an attorney when you go through arbitration with Amazon? The short answer is no.

You can arbitrate pro se, a Latin legal maxim which means “in one’s own behalf”, i.e., without the need of a lawyer.

However, if you wish to skimp on this area and choose to DIY the whole process, make sure that you’re either a lawyer yourself or you’re as diligent as Sheldon Cooper when it comes to preparing your case. Because attorney or no attorney, the decision made by the arbitrator is binding to you.

We recommend that you seek the help of a lawyer in order to make your case stronger. Their legal education prepares them to see the next 5 steps and set the necessary defenses early on.

Arbitrators’ Fees

The filing fees don’t include the compensation for the arbitrator. The rate for the compensation varies and will be suggested by the AAA regional office.

Note also that it’s not all the time that only one arbitrator is required. Generally, the parties can stipulate how many arbitrators they would want to hear the case. But what if they can’t agree?

The AAA rules provide the following default number of arbitrators in case of disagreement:

Amount of Claim or Counterclaim	Number of Arbitrators
At least $1 million	3
Less than $1 million	1

According to an article by John Di Giacomo, who was also a guest in our podcast, arbitrators’ compensation can range from $300 to $700 per hour. Needless to say, it’s not cheap.

Advance Deposits

In some cases, the association will require the parties to deposit in advance an amount that will cover hearing expenses.

The amount will be based on estimates provided by the arbitrator(s), considering

• the complexity of the case and
• other information provided by the parties

However, at the end of the proceedings, the AAA will render an accounting to the parties and return any unexpended balance. Either you or Amazon can also request for an itemization or explanation for the deposit request.

Mediation Expenses

For claims or counterclaims that are more than $75,000, the parties by default need to mediate their dispute upon the administration of the arbitration or at any time when it is pending. There are no additional filing fees, but you have to pay the mediator’s fees.

Mediation is different from arbitration in that the mediator does not have the authority to make a binding decision or reward. What he or she does instead is to guide all parties involved to come to a compromise and find common ground.

The AAA has provided a list of mediators as well as their rates. Expect to pay at least $350 per hour for mediation.

So how long does mediation take?

According to Rule M-12 of the AAA Rules, mediation will terminate in four cases:

• When there is a settlement agreement executed by the parties
• When the mediator determines that mediation will not result to the parties settling their dispute
• By voluntary termination of all parties involved
• When there is no communication between the mediator and any of the parties or their representatives within 21 days after the mediation conference.

As you can see from the list, there is no exact length of time intended for mediation.

Fortunately, if you wish to opt out of mediation in order to avoid the fees, you can do so unilaterally by notifying the AAA and the other parties to the arbitration.

Other Fees

There are a lot of other fees that can creep up on you during the arbitration process. These include the following:

• Hiring an interpreter (if necessary)
• Hearing room rentals
• Accommodation and travel expenses of witnesses
• Post-award charges
• Sanctions
• Procurement of copies of certified papers

Luckily, it isn’t at all times that there needs to be an in-person hearing. For claims or counterclaims that are less than $10,000, the dispute may be resolved in writing. If it exceeds this amount, then there is a need to conduct a hearing and an exchange of copies of evidence prior to it.

But even if a hearing is needed, you can save on expenses for room rentals by choosing to have the arbitration done over the phone or online.

Should You Expect Refunds for Arbitration Expenses?

No refund is allowed for the following:

• Initial filing fees
• Proceed Fees

However, the final fee will be refunded once the case is concluded without a hearing.

However, this refund is not automatic. You should notify the AAA at least 24 hours before the scheduled hearing. If you fail to give this notice, the final fee will become non-refundable.

Note: Pay your Proceed Fees within 90 days from submission of the Demand for Arbitration. Failure to do so will close the case.

Reimbursement from Amazon

Should you expect any reimbursement from Amazon? After all, it was their system and their mistake that led you to arbitrate in the first place.

The Agreement states in item 18:

“Payment of all filing, administration and arbitrator fees will be governed by the AAA's rules. We will reimburse those fees for claims totaling less than $10,000 unless the arbitrator determines the claims are frivolous.” (emphasis supplied)

Thus, if you win, you are entitled to reimbursement of not more than $10,000 for arbitration expenses.

But what if you lose? Will you be liable for Amazon’s arbitration fees?

The same Agreement provides:

“Likewise, Amazon will not seek attorneys' fees and costs from you in arbitration unless the arbitrator determines the claims are frivolous.” (emphasis supplied)

Thus, as long as the arbitrator does not find your claim frivolous, you will not be liable for Amazon’s expenses.

What is a frivolous claim? It’s one that was instituted with basically little to no chance of winning. It might be because your arguments are weak and unfounded or there was a clear violation of policies. This is why you should make sure that you have a strong case first before you go into arbitration and that you seek the advice of a lawyer.

Other Remedies Sellers Can Take Against Amazon

If after reading the previous sections you find yourself thinking that maybe arbitration is not the right way for you to assert your claims, what other options does an Amazon seller have?

I’ve already discussed one of these earlier, which is to file a claim against Amazon in a small claims proceeding. This applies only if

• Only financial harm is involved
• The claim is no more than $10,000

And although less effective than it was originally, you can email Jeff Bezos directly at jeff@amazon.com.

On the other hand, if your concern is related to intellectual property such as trademarks and patents, you can report using Amazon’s Report Infringement Form or if you are a patent owner with a brand registry account, you can use the Brand Registry Program.

Conclusion

No seller wants to reach that point when it becomes necessary for them to go after Amazon whether through arbitration or judicial action. However, the company’s system, while advanced than most, is imperfect. This can leave business owners with no choice but to assert their rights by seeking arbitration.

If you’re reading this article because you’re about to go through the process yourself, I wish you the best of luck. And if you’re comfortable and it’s legally allowed, you can share your experience with us in the comments section.

 

Disclaimer: I am not a lawyer nor am I an expert in arbitration proceedings. This article is a result of online research only, so if you find any inconsistencies or outdated information, please feel free to leave us a message.