Judge Holds Arbitration Award in Abeyance in Amazon Seller Dispute

U.S. District Court Judge Andrew Carter ordered the arbitration award in an Amazon seller dispute to be held in abeyance pending the court’s resolution of petitioner Cowin Technology’s forthcoming motion to remand the case to federal court, Cowin's motion to vacate, and any Amazon cross-motion to confirm, said the Tuesday order (1:23-cv-03054) in U.S. District Court for Southern New York in Manhattan.

The parties conferred about a schedule to oppose Cowin’s application to vacate an arbitration award and Amazon’s anticipated cross-motion to confirm the award, said counsel John Magliery of Davis Wright in a Tuesday letter to Carter. Cowin plans to move to remand by Friday.

Cowin filed a notice of removal this month from New York State Supreme Court to the U.S. District Court for Southern New York in Manhattan (see 2304130054) that seeks to overturn a December arbitration ruling over the dispute with Amazon. In December, Howard Reiss, an arbitrator at the American Arbitration Association (AAA), denied the Hong Kong-based company’s claims for over $1 million it alleges it’s owed by Amazon. The e-commerce company withheld payment for violations of its product reviews policy, and Reiss denied all of Cowin’s claims.

Amazon’s Business Solutions Agreement (BSA) says if Amazon determines that an account has been used to engage in deceptive, fraudulent or illegal activity -- or if the seller repeatedly violates Amazon’s program policies -- it can permanently withhold any seller payments. Disputes are to be handled by AAA on an individual basis, Cowin noted in its March 13 petition to vacate the arbitrator award in the New York court.

As the dominant online marketplace with “65% to 70% of all U.S. online marketplace sales,” Amazon has “monopoly power over most third-party sellers and many of its suppliers,” said Cowin’s petition. “With such kind of e-commerce dominance, small retailers do not have any viable or meaningful choice other than accepting Amazon’s terms if they want to get their products in front of online consumers,” it said, citing The Future of Commerce.

Third-party sellers must fully accept Amazon’s terms and conditions in the BSA before they can open an account, including a compulsory arbitration provision, and sections on seller account termination and sales proceeds withholding, said the petition. Sellers “have no negotiation power regarding the fairness and enforceability of the contract terms,” making the BSA an “adhesion contract.”

Cowin became an Amazon seller Nov. 30, 2020, by adhering to the BSA, and it regularly paid Amazon a subscription fee to use and maintain its account, said the petition. In June 2021, “without prior warning,” Amazon deactivated Cowin’s accounts and accused it of “manipulating customer reviews” of its products, it said. The notice said Cowin could contact the disbursement team to appeal for the return of its funds after 90 days.

After requesting and receiving certain verifications, Amazon denied Cowin’s appeal and confiscated its funds, the petition said. Amazon notified the seller its account “was used to engage in deceptive, fraudulent or illegal activities that harmed our buyers, other sales partners, and our stores,” said the petition. “The funds in your account will not be paid to you,” Amazon said, calling it a “final decision," the petition said.

Amazon “froze” Cowin’s “entire sales proceeds” totaling $1.1 million, said the petition. Later, Amazon deducted unauthorized charges from those proceeds after account deactivation. The funds are “net proceeds” that belong to Cowin for sales of inventory it sent to Fulfillment by Amazon, it said. The seller has also incurred revenue losses due to Amazon’s actions, which it calculated as $3.9 million based on its average monthly sales of $1 million and an average 34% commission fee to Amazon.

Cowin seeks an order from the court vacating the Dec. 15 award of the arbitrator “for exceeding the arbitrator’s power, completely irrational and manifest disregard of the law.” It seeks the $1.1 million sales proceeds from its seller account on June 24, 2021, plus 12% interest, a refund of $3.9 million as compensation for losses for “improper account blocking,” and legal costs.