A guide to understanding Amazon Arbitration for Amazon sellers

It is likely that when you first started your business, you quickly signed the paperwork Amazon gave to you so that you could begin selling sooner rather than later. You may not have even noticed the part of the agreement that discusses what will happen if you become involved in a dispute with Amazon, and you may not have consulted an Amazon seller attorney. Only later, once a disagreement arises and you find out you must submit to arbitration, does this section become important to you.

There are certain parts of the Business Solutions Agreement (BSA) that dictate how disputes are handled, and as an Amazon seller, you need to understand them.

Table of Contents

Know Your Agreement: An Amazon Seller Attorney Explains The Amazon BSA

To understand the arbitration process and what it means for you as a seller, it is best to take a look at Amazon’s BSA. The BSA is a contract that every third-party seller must sign to operate on Amazon’s platform. It states that arbitration is mandatory and must be conducted by the American Arbitration Association (AAA).

Summary of Section 18 of the BSA

Section 18 of the BSA states that Amazon and you, as the seller, both consent that any dispute with Amazon or its Affiliates or any claim relating in any way to this Agreement, or your use of the Services, will be resolved by binding arbitration as described in this paragraph, rather than in court. It then lays out three possible exceptions:

Small Claims Exception: This exception states that you are not bound to submit to arbitration and you may assert claims in a small claims court that is a Governing Court if your claims qualify. The problem with this exception is that most jurisdictions have a very low threshold (around $5,000) so most claims will not qualify.
Intellectual Property Exception: When intellectual property (IP) rights are at stake, the BSA says that you or Amazon may bring suit in the Governing Courts, submitting to the jurisdiction of the Governing Courts and waiving your respective rights to any other jurisdiction to enjoin infringement or other misuse of intellectual property rights.
Counterfeit Goods Exception: Amazon may bring any claims related to your sale of counterfeit products on the Amazon Site to the Governing Court and seek any remedy available under law related to those claims.

Finally, Amazon and you each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action. This is important because it precludes several plaintiffs and their Amazon seller attorney from banding together and arbitrating their cases against Amazon as one. Each case must proceed individually.

Arbitration Fees Per the BSA

AAA and Arbitrator Fees: Amazon will reimburse those fees for claims totaling less than $10,000 unless the arbitrator determines the claims are frivolous. This money is for administration fees, not the fees for your Amazon seller attorney.
Expedited Procedure: The expedited procedures of the AAA’s rules will apply only in cases seeking exclusively monetary relief under $50,000, and in such cases, the hearing will be scheduled to take place within 90 days of the arbitrator’s appointment.

Amazon Arbitration Explained By Our Amazon Seller Attorney

Arbitration is a method of resolving disputes outside of the courtroom. Parties in a dispute actually refer their contested matter to an arbitrator who reviews the evidence, listens to the parties’ arguments, and makes a decision. There is no judge and no jury in arbitration. It is often favored over traditional litigation as it is less formal than a courtroom hearing or trial and less expensive. Also, an arbitrator can award on an individual basis the same damages and relief as a court (including injunctive and declaratory relief or statutory damages) and must follow the terms of this Agreement as a court would.

The arbitrator is often a retired judge or a knowledgeable attorney.

Generally speaking, there are two different types of arbitration, mandatory or forced arbitration and voluntary arbitration. According to Amazon’s BSA, sellers are required to submit to arbitration, meaning that it is mandatory or forced. Also, any decision that is reached in the arbitration is binding or final. This means that if one party does not agree to the decision that was reached in the arbitration they cannot turn around and file a lawsuit instead. There are exceptions to the requirement that the arbitration is binding, but they are very limited. For example, you could refuse to be bound by the arbitration and file litigation in court if Amazon has done something illegal, such as bribing the arbitrator. If you feel you may have a valid exception, you should address it with your Amazon seller attorney.

Pros & Cons of Amazon Arbitration

There are quite a few advantages to arbitration. Parties are less likely to be hostile in this forum and it is generally less expensive but more expeditious than litigation. It is also private and it can be kept confidential which is not always possible with litigation. Finally, arbitration has limited discovery, simplified rules of evidence and procedure, and can be scheduled at a time conducive to all parties.

The disadvantages of arbitration should also be considered. There is often a lack of transparency as you would often have in litigation, and the playing field may not be even. The pool of arbitrators available to hear the matter is questionable, yet in many cases, their decision is final.

Your Amazon seller attorney will explain to you the advantages and disadvantages of arbitration in your specific case.

An Arbitration Roadmap

From start to finish, the process typically takes approximately 365 days or one year. The length honestly depends on how long the discovery step takes. Below, our Amazon seller attorney breaks down this time frame and explains the six stages of arbitration.

Filing & Initiation

Day 1-15
BSA Prerequisite: Send a letter requesting arbitration and describing your claim to Amazon’s registered agent. Thereafter, an Amazon Seller submits a Demand for Arbitration, a copy of the BSA, and the appropriate filing fee to the AAA.
Expected Costs: AAA Admin Fees & Attorney Fees

Arbitrator Selection

Day 15-44
AAA identifies arbitrators from the AAA National Roster of Arbitrators and provides their curriculum vitae to the parties. The AAA invites the most mutually agreeable arbitrator(s) to serve on the case.
Expected Costs: AAA Admin Fees & Attorney Fees

Preliminary Hearing

Day 44-85
Parties and the arbitrator discuss the substantive issues of the case and the procedural matters, such as discovery, witness lists, and dates. The Scheduling Order, which serves as the framework for hearing preparations, is established.
Expected Costs: Attorney Fees & Arbitrator Fees

Discovery

Day 85-222
The parties work within the time frames set forth at the Preliminary Hearing to exchange information and prepare their presentations. The arbitrator addresses any challenges related to information sharing.
Expected Costs: Attorney Fees & Arbitrator Fees

Evidentiary Hearing

Day 222-258
Parties present testimony and evidence to the arbitrator.
Expected costs: Attorney Fees & Arbitrator Fees

Post-Hearing Docs/ Award

Day 258-288
If the arbitrator allows, parties may submit additional documentation. The arbitrator closes the record and, no more than 30 days later, issues a decision addressing all claims raised in the arbitration, completed when the award is issued.
Expected Costs: AAA Admin Fees & Attorney Fees & Arbitration Fees

Speak With An Amazon Seller Attorney at ESQgoⓇ

An Amazon seller attorney can help explain to you how the arbitration process works and what you can expect to happen. They can also help you through the entire process so you can get back to your business of selling on Amazon. Contact our firm today to schedule a free initial 30-minute consultation with one of our lawyers. We may be reached by calling 888-600-1925 or via our contact page.

Amazon Seller’s Guide to AAA Arbitration