Amazon is one of the world's largest and most successful companies. However, the company has also been criticized for its use of forced arbitration, a process that requires employees and third-party sellers to resolve disputes with the company in private arbitration rather than in court.
What is Forced Arbitration?
Forced arbitration is a clause in a contract that requires disputes between two parties to be resolved outside of the court system, typically through a private arbitrator. Amazon's arbitration clause is contained in section 18 of its Business Solutions Agreement (BSA), an adhesion contract that every seller wishing to sell on Amazon must agree to without negotiation. This means that sellers and employees cannot file a lawsuit against Amazon. To sue Amazon, they must file for arbitration with the American Arbitration Association (AAA). Section 18 of the BSA also limits class or group actions against Amazon, and they have limited rights to appeal the arbitrator's decision. Section 8 of the BSA purports to limit Amazon's liability to sellers or even exonerate it from liability altogether.
Why Does Amazon Use Forced Arbitration?
Amazon uses forced arbitration for several reasons. First, because arbitrations are private and arbitrators and arbitration administrators cannot disclose their awards, it allows the company to keep its disputes out of the public eye. This means that Amazon can avoid negative publicity and potential damage to its reputation. It also means Amazon can continue to benefit from BSA clauses like section 2, which allow it to confiscate a seller's funds for virtually no reason, if it suspects the seller has engaged in fraudulent conduct or repeatedly violated its policies, and section 8, which attempts to limit Amazon's liability to sellers to zero, both of which are unenforceable under Washington law.
Second, forced arbitration is often cheaper and faster for companies than litigation. This is because arbitration proceedings are typically less formal than court proceedings, and they do not require the same level of discovery.
Third, forced arbitration can be stacked in favor of companies. This is because the arbitrator pools in Amazon's state of Washington have been tainted because Amazon is the one of the largest users of forced arbitration in the country, according to the Seattle Times, and is it is likely the largest user of AAA arbitration services in that state, and their arbitrators, although supposed to be neutral, may be more likely to rule in favor of the company that guarantees their employment.
How Does Forced Arbitration Harm Employees and Customers?
Forced arbitration harms employees and customers in several ways. First, it takes away their right to a jury trial. This means that they cannot be heard by a panel of their peers, and they must instead rely on a single arbitrator who may be biased in favor of the company.
Second, forced arbitration makes it difficult for employees and customers to hold companies accountable for their wrongdoing. This is because arbitration proceedings are private, and companies can use this to their advantage by hiding evidence of wrongdoing.
Amazon's Record on Forced Arbitration
Amazon has been a leading abuser of forced arbitration. According to a 2019 article in The American Prospect, Amazon is the biggest abuser of forced arbitration in the United States. The company has used forced arbitration to silence critics, avoid class action lawsuits, and protect itself from liability.
Amazon's use of forced arbitration has been criticized by consumer advocates, labor unions, and lawmakers. In 2021, the Biden administration issued an executive order that banned forced arbitration in government contracts.
What Can Be Done About Forced Arbitration?
There are a number of things that can be done to address the problem of forced arbitration. First, Congress could pass a law that prohibits forced arbitration in all consumer and employment contracts. Second, states could pass laws that prohibit forced arbitration in their own courts.
Third, companies could voluntarily stop using forced arbitration, but, given the fact that it has been so lucrative for Amazon to keep hundreds of millions of seller's net sales proceeds after termination of their seller accounts, this is not likely.
Forced arbitration is a harmful practice that allows companies to silence their critics and avoid liability for their wrongdoing. Amazon is the largest abuser of forced arbitration, and the company's use of forced arbitration has had a significant negative impact on employees and third-party sellers, which, in turn, has affected consumers.
It is important to raise awareness of the problem of forced arbitration and to take action to address it. By doing so, we can help to ensure that everyone has access to justice. If Amazon owes you money and refuses to disburse it, please call us for a free arbitration consultation, or drop us an email, chat or submit your question here. We are here to help, 24 hours a day, seven days a week.