Amazon Fails to Treat 3rd-Party Sellers Fairly, Says Petition to Vacate Arbitration Award
Amazon removed to U.S. District Court for Southern New York from New York Supreme Court the May 12 petition of third-party seller Longyan Junkai Information Technology to vacate a $461,000 arbitration award decided in Amazon’s favor, said its notice of removal Friday (docket 1:23-cv-04869). The contested money includes sales proceeds that Amazon refused to disperse to Longyan Junkai after discovering it was selling counterfeit goods on the Amazon store, it said.
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The New York Convention applies in this case because Longyan Junkai is a foreign company, based in China, said Amazon. Because the arbitrator’s award was entered in the U.S., the domestic provisions of the Federal Arbitration Act, plus the international provisions in the New York Convention, “govern this proceeding,” it said. Chapter 2 of the FAA “authorizes removal of a petition to vacate an arbitration award governed by the New York Convention,” it said. The Southern District of New York has subject-matter jurisdiction over the case, it said. SDNY “is the proper place to remove this action” because it’s the federal district court “that embraces the place where the original action was filed and is pending,” it said.
Longyan Junkai’s petition to vacate said the New York Supreme Court is the proper venue in light of the U.S. Supreme Court’s 2022 decision Badgerow v. Walters. The Badgerow decision “underscores state courts’ role” in enforcing the FAA, said the petition. The “practical effect” of Badgerow is that a party trying to confirm or vacate an arbitration award “will often have to turn to the state, not federal, courts to do so,” which the court called a feature of the statute, it said.
With the enormity of Amazon’s “e-commerce dominance,” small retailers like Longyan Junkai don’t have “any viable or meaningful choice other than accepting Amazon’s terms if they want to get their products in front of online consumers,” said the petition. Since Amazon reaps 34% of the sales proceeds of the average third-party seller, “one might wonder why Amazon continually fails to treat third-party sellers fairly,” it said. “The reason is that both compete to gain more customers and sales on the same platform,” it said.
As Amazon continues to “amass” more of the e-commerce market and “abuses its market dominance,” third-party sellers “have accused Amazon of arbitrarily blocking their seller accounts and withholding sales proceeds,” said the petition. Amazon also spies on its third-party sellers, “copying their best-selling products,” it said. The conduct gives first-party sales of Amazon’s own products “preferential search results,” reducing competition in Amazon’s favor, it said.
When Amazon removes the selling privileges of third-party sellers “at will,” it simultaneously “confiscates the entire sales proceeds in the third-party seller’s account,” said the petition. Those proceeds can range up to millions of dollars in cash, “representing two weeks to two months of a seller’s sales for the seller’s sold merchandise on Amazon,” it said. Through this “scheme,” Amazon “further boosts its corporate profit by confiscating the proceeds found in third-party sellers’ accounts,” it said. The practice amounts to an “unwarranted money grab,” it said.