Online small and mid-sized businesses on Amazon.com, Inc. (NASDAQ:AMZN)’s platform are forced to accept a binding arbitration clause. Such clauses in the agreement make online sellers settle the disputes on an individual basis only and outside of the court.
Sellers are barred from teaming up
Amazon barred the sellers from teaming up for any representation or to file the complaint. President and founder of OJ Commerce, Jacob Weiss said the forced arbitration clause makes the legal expenses prohibitively higher. The outcomes of legal disputes are mostly unfavorable. Amazon incentivizes arbitrators to give the verdict in its favor.
Weiss also said the e-commerce giant has also mastered the technique to improve the arbitration costs exorbitantly higher for small and medium sellers on its platform. Prohibiting class of action insulates Amazon.
Sellers of Amazon complains to the lawmakers
Sellers on the platform of Amazon complained to the lawmakers in the US against the forced arbitration clause. Weiss said the House Judiciary Sub-committee that OJ Commerce and other e-commerce business owners depend on the platform of Amazon for their survival. As a result, Amazon is using its significant online presence to make them agree to forced arbitration.
Mid and small-sized businesses, which account for over 2.5 million sellers, make up a sprawling marketplace on Amazon. They help Amazon to report record revenues. It caught the eye of antitrust investigators overseas and the US because the e-commerce giant is using a large market presence to squeeze the sellers that use its platform.
During the hearing, Weiss said the merchants are prevented from teaming up to share the arbitration costs. Apart from attorney fees, Weiss spent an arbitration fee of over $50,000 in one case. He could recover a very small amount despite paying higher arbitration charges. The house of democrats on the subcommittee of antitrust investigation recommended preventing the imposition of a forced arbitration clause.
Congress can revisit arbitration clauses and make a favorable ruling for the small and midsized businesses that rely on Amazon for their survival.
The antitrust subcommittee also investigated other tech giants like Google, Apple, and Facebook for over a year besides focusing on Amazon. It recommended several changes to the prevailing antitrust laws and insisted to implement them.