Amazon changes third-party seller terms after investigation into unfair suspensions

By Polly Chen

With its online marketplace, Amazon is now the world's biggest retailer. And third-party sellers have been crucial to Amazon's growth, as they now make up 58 percent of Amazon's physical merchandise sales.

But Amazon's terms for its third-party sellers are not always seller friendly. The company once kicked thousands of third-party sellers off its platform without any advanced notice.

To investigate Amazon's treatment of sellers, Germany's Federal Cartel Office launched a probe into Amazon's Germany site Amazon.de at the end of 2018. Now, Germany's antitrust authority says it will drop its seven-month investigation after Amazon agreed to amend its Business Solutions Agreement.

The new terms will apply not only to Amazon's German marketplace, but also to all its global marketplaces in the U.S., Britain, France, Italy, Spain and Asia.

The Cartel office chief Andreas Mundt said in a statement:

We have achieved far-reaching improvements for retailers on Amazon's marketplaces. We are dropping our investigation.

But the good news ends there for Amazon. Amazon is now also under EU fire for potentially exploiting merchants' data.

New terms require advanced notice for suspensions

Amazon sellers have long been urging Amazon to improve its rules and protect their businesses on Amazon.com.

Amazon's new changes to its Business Solutions Agreement will take effect on August 16^th. Here are some of the most notable changes:

• Amazon will give its third-party sellers a 30 days’ notice and an explanation before removing them from the platform.
• Third-party Amazon sellers in Europe will be able to take Amazon to court in their own country. Previously this was only possible in Luxembourg.
• Third-party Amazon sellers will be able to appeal Amazon’s decisions on who must bear the costs of returns and refunds.

The new terms will give sellers more opportunities to respond to unfair suspensions and plead their case. But merchants will still need to wait and see how the terms are implemented. Critics say the agreement language is too vague and gives Amazon too much leeway.

Many Amazon sellers complain that Amazon's suspension notices lack details about specific violations and corrective actions needed to restore activity. Chris McCabe, a former Amazon employee who now helps suspended sellers get reinstated, says Amazon employees still have a lot to learn:

They need better training and to be more specific in terms of reason and causality around the suspensions.

EU launches investigation into Amazon for exploiting merchant data

On the same day Amazon announced the changes to its seller terms, the European Commission also opened a formal antitrust investigation into Amazon. The Commission aims to investigate whether Amazon's data usage gives it an unfair advantage over smaller sellers on the Marketplace platform.

The European Commission will examine Amazon's data agreements with sellers and investigate how Amazon uses their sensitive data.

The Commission is worried that Amazon's dual role as both a retailer of products and a marketplace operator presents conflicting interests. Amazon could use independent seller data develop its own products to sell.

But Amazon claims their data algorithms are solely used to “optimize to what customers want to buy regardless of the seller”.

Amazon's “Buy Box” calculations, in particular, are under consideration. Winning a Buy Box can be a key competitive advantage for third-party sellers to gain more business. But it's currently unclear how Amazon chooses to allocate Buy Boxes.

The European Commission's Competition Commissioner Margrethe Vestager believes investigating Amazon is crucial to clearly lay down the law and set a precedent:

Ecommerce has boosted retail competition and brought more choice and better prices. We need to ensure that large online platforms don't eliminate these benefits through anti-competitive behavior.

Third-party sellers are key to Amazon's success. CEO Jeff Bezos said “third-party sellers are kicking our first party butt” in his most recent letter to shareholders. Amazon may need to launch more rules to protect third-party sellers' rights in the future if they want to maintain their growth and success.

Follow the link below to learn more about Amazon's changes to its terms of service for third-party merchants.

Amazon appeases German watchdog, but EU opens new probe – Douglas Busvine, Reuters

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Polly Chen is a Client Manager at InTouch Manufacturing Services, a QC firm that performs product inspections and factory audits in Asia for clients in the US, EU and Australia.