From The American Prospect, July 10:
With 2.5 million third-party sellers, it’s the largest employment-related class barred from using courts for complaints, and confined to the online retailer’s private law.
Some of our prior posts on arbitration:In the past several months, advocates have expressed surprising optimism that they will be able to make progress in dismantling America’s forced-arbitration system, which supersedes dozens of laws enacted by Congress to protect workers and consumers, and bars access to the constitutionally mandated right to take a complaint to court.A warehouse worker organizes Prime Now customer orders at the Amazon warehouse in New York.
Using a once-benign law, the 1926 Federal Arbitration Act, which was given new corporate teeth by right-wing courts, an employer can today demand that a worker sign away a range of rights as a condition of employment. Consumers who purchase possibly defective products are put in the same position by corporate sellers. Under clauses in consumer and employment contracts, disputes must be referred to an arbitrator chosen by the company, and class action suits are prohibited.
However, galvanized by the #MeToo movement, workers have organized for and won concessions at workplaces like Google over ending forced arbitration for sexual harassment claims, which places disputes in a secret tribunal and represents an obstacle to stopping systemic misconduct. New York state prohibited mandatory arbitration of sexual harassment claims in April, and California is attempting a broader ban in employment contracts.
While national legislation to prohibit forced arbitration has a dim chance of passing as long as Republicans have a say, Lindsey Graham (R-SC) did lead a hearing on the subject in April, expressing support for reform. And Elizabeth Warren’s presidential campaign has endorsed making federal contractors that use arbitration clauses ineligible for contracts, which would cover a substantial segment of industry.
To break the arbitration debate more into the mainstream, one company should really garner more attention as a serial abuser of the arbitration process—Amazon.
ALL OF AMAZON'S third-party sellers, responsible for more than half of total sales on the website, must sign a contract that commits them to mandatory arbitration in the event of a dispute. “We each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action,” the arbitration clause reads, meaning that no seller can team up with others similarly situated to bring a complaint. Court trials are also waived.
At last count, there were 2.5 million sellers hawking products on Amazon, making it the largest single employment-related arbitration clause in America. No other company either employs as many people or forces an arbitration relationship on its suppliers or partners. “The only way you’re going to see anything that size is in the digital space,” said Jay Himes, an attorney at Labaton Sucharow.
The contract effectively enforces Amazon’s private legal space, a maze of rules and regulations placed on third-party sellers that can lead to debilitating suspensions and real hardships. “There’s a fear of retaliation, and the sellers are in competition against themselves,” said Shaoul Sussman, a law student who has gained notoriety for his theories about Amazon’s treatment of marketplace sellers. “It’s an abuse of legal loopholes but a profit margin machine.”
Amazon’s third-party sellers, including both people who stock up at discount store sales and flip the product and true entrepreneurs featuring new products, pay for the privilege of accessing potentially millions of customers. Every seller pays a monthly flat subscription rate, and referral fees for every sale of typically 15 percent, though they can range higher depending on the goods. Sellers also pay to use “Fulfillment by Amazon” (FBA), where Amazon handles customer service, storage, and shipping through its vast logistics network.
Amazon’s revenue from these fees grew to nearly $43 billion in 2018, more than one out of every four dollars in third-party sales.The company makes four times as much profit from marketplace fees as it does from its own retail sales, and that doesn’t include revenue from advertising, which many third-party sellers must invest in to get noticed.
But with so many sellers, Amazon has created a marketplace that’s simply too big to manage. “People are under attack,” said Chris McCabe, a former Amazon employee who now consults with sellers. “They get their listings sabotaged.”
Third-party sellers can get hurt in a million different ways: losing control of their listing, having their products purchased and set on fire to claim malfunctioning, seeing their inventory mislabeled as sex toys. Entire websites have formed to write phony reviews, which sellers use to flood rivals with negative reviews, or with badly written five-star raves to draw charges of fakery. Efforts to police reviews or patent infringement led to black-hat sellers filing bogus complaints in a rival’s name.
“People will look around the platform, see a product doing well,” said Cynthia Stine, a consultant for third-party sellers based in Dallas, noting another scam. “They will file a design patent on it, get a patent or trademark. And they get on the platform and kick the brand owner off. That takes some balls.”
Amazon is weirdly passive about mediating in these disputes. “If they’re proactive, they create liability,” said James Thomson, who previously worked for Amazon and now advises brands on their Amazon channels. “The lawyers told us don’t check anything, but if someone complains, then check.”....MUCH MORE
Arbitration: Outsourcing Justice
"The Pernicious Spread Of Arbitration Stacked Against The Individual (and the class)".
On a slightly different topic, vendor/customer arbitration it all goes back to a securities law case. See:
"As Three More New Economy Companies Are Sued For Employee Misclassification, Uber Thinks It Has the Golden Ticket" for (Shearson v. McMahon, 1987)
