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Amazon has created fertile ground for bribery schemes, sellers say

In the wake of a $100 million Amazon bribery scandal, sellers say the tech giant deserves more scrutiny for suspending merchants with no warning and little explanation.

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Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

Last month, US federal authorities indicted six e-commerce consultants and former Amazon employees in a $100 million bribery scheme in which insiders allegedly accepted payments to help certain Amazon merchants on the platform and hurt others. In the close-knit world of top Amazon sellers and consultants, this was big news. But it was not a surprise. Rumors of such behavior are common in industry circles, and Amazon itself admitted in 2018 that it was investigating employees for reportedly leaking internal marketplace data to outsiders in exchange for cash.

In the weeks since the indictments, a half dozen top-earning Amazon sellers told Recode that the consultants and former employees indicted should face the legal consequences if they broke the law. But these same top sellers also argued that the problem is much bigger than a few bad apples and that Amazon deserves scrutiny for creating the fertile ground for bribery schemes to blossom. The reason? Amazon’s inability or refusal to consistently offer adequate support to its 1.7 million sellers when they have issues, especially when it comes to suspensions that Amazon hands down with little explanation and sometimes no warning. On top of these issues, it’s not uncommon for sellers to languish in Amazon purgatory for weeks or months trying to reinstate their business, either on their own or with the help of an ecosystem of consultants — some of whom prey on merchants’ desperation.

“With Amazon, you are guilty until proven innocent,” said Eytan Wiener, the co-founder and chief operating officer of a large Amazon seller, whose firm was once suspended by Amazon in the UK and who has helped other suspended sellers in the US.

This reality — that Amazon sellers can have their livelihood snatched from them at any time — can benefit Amazon, too. The company introduced a premium seller program in 2018 that charges thousands of dollars a month to assign a dedicated Amazon representative that a seller can easily contact. While these reps do not oversee account suspensions and can’t directly reinstate a merchant, some large Amazon sellers pay the fee mainly so they have a person they can get on the phone in the event of a suspension or other severe penalty.

Amazon often boasts that the small and mid-sized merchants who help stock the virtual shelves of The Everything Store account for 60 percent of the company’s e-commerce sales worldwide. It has emphasized this as the company’s treatment of its sellers has come under scrutiny in the past few years, most recently during Jeff Bezos’s congressional testimony in July and in the wake of a House antitrust investigation report that followed. The tech giant has certainly created an efficient way for small merchants to build global e-commerce businesses with small teams and little overhead in ways that wouldn’t have been possible even 10 years ago. At the same time, as Amazon has aggressively recruited more sellers to its platform, it has been plagued by complaints about the support it offers them — most notably, the company’s penchant for suspending sellers from doing business on the site with no warning and nary an explanation.

This was the situation that Jacqueline Tatelman, the co-founder of the backpack brand State Bags, faced earlier this year. Her startup brand does most of its business through its own website but decided to start selling on Amazon earlier this year in order to expand its online presence before the back-to-school shopping season this fall. The company’s plans were delayed when the pandemic hit the US in March and Amazon prioritized essential goods in its warehouses. Then, as the company prepared to finally start selling on the platform in May, a shocking email from Amazon landed in its inbox:

“We have discovered information that indicates your Amazon seller account has engaged in deceptive, fraudulent, or illegal activity. ... As a result, we have closed your Amazon seller account to prevent harm to our customers, other selling partners, and our store.”

The email ended by saying that the brand should email Amazon if they thought the decision was an error. And State Bags did, repeatedly. The only thing that had changed between the time the company set up its Amazon storefront and when it received the suspension notice was a change of the business credit card on file, which was information Amazon had requested.

Amazon responded once more with a generic note saying that an internal case had been opened. Then silence, for months. No reason given, and no updates, as State Bags inventory with a retail value of $60,000 sat unsold in Amazon warehouses, with no guidance from the tech giant on if or how the brand could get the inventory out.

“It’s not ethically okay to do these things to these small brands who are in the middle of the ocean, in a storm, with a tiny boat and a broken paddle,” Tatelman told Recode. “That’s how small brands feel.”

After Recode notified Amazon of the State Bags suspension, Amazon spokesperson Cecilia Fan said the company would reach out to the brand “to address their concerns.” A day later, Amazon granted State Bags access to its storefront for the first time since May.

And the State Bags story is not a one-off. Talk to any Amazon seller that does significant business on the site and there’s a good chance they have a similar tale or know a peer who does. Just this August, a LinkedIn post detailing a similar suspension problem that was written by the founder of a car dashboard camera retailer was widely read in the Amazon seller community. Titled “Please Help! An Open Letter to Jeff Bezos, Amazon Leadership, and the Seller Performance Team,” it described how Amazon had suspended the seller out of nowhere and for six months had claimed that the seller forged documentation. Two days after the president of The Dashcam Store, Andrew Aboudaoud, posted the cautionary tale, Amazon reinstated his selling account with a boilerplate email. No explanation or apology was given.

“The way Amazon currently handles their relationships with third-party sellers is fundamentally broken (in a variety of ways),” Aboudaoud wrote in a message to Recode, “although it does appear Amazon is slowly taking steps to overhaul this system.”

Fan, the Amazon spokesperson, emailed Recode a statement that read in part: “Amazon’s Selling Partner Support team handled more than 51 million contacts from selling partners in 2019, and we strive to respond to and resolve every contact expeditiously.”

“Selling Partner Support responded to more than 90% of emails in under 12 hours; answered more than 96% of phone calls in under 90 seconds; answered more than 90% of chats in under 90 seconds; and fully resolved more than 85% of all seller issues in under 24 hours,” the statement added. Using that 85% figure, if every one of Amazon’s 1.7 million sellers has an issue at one point, that still means 255,000 of them — or 15% — could have to wait more than 24 hours for a resolution. I’ve been interviewing Amazon sellers for years, and it’s not uncommon for these cases to remain unresolved for weeks, if not months.

Amazon sellers acknowledge that scaling seller support at Amazon’s size is a challenge, and some say the seller support experience has gotten modestly better in recent years.

“They’ve done better and are a bit more explanatory, but still have a long way to go,” Wiener, the co-founder of a large Amazon seller, told Recode. “But they should get some credit for what they’ve done because it’s a very hard task.”

Still, sellers argue that Amazon’s platform is so big, even a few percentage points of cases that slip through the cracks or are the result of technical errors can wreck many small businesses and the lives of the people who run and work for affected merchants.

Some sellers have turned to the paid seller support program that Amazon offers as a type of insurance against unexpected problems. Amazon charges a monthly fee of between $1,600 and $5,000 for the program, depending on the size of the seller’s business. Fan, the Amazon spokesperson, said the optional paid program provides sellers with “business guidance on topics such as inventory management, merchandising, and global expansion,” but “does not provide expedited account resolution” when Amazon suspends an account or takes other serious action against a merchant.

Sellers who use the program or are familiar with it agreed that the paid internal Amazon reps do not directly resolve suspensions or other major account issues. But these sellers said many merchants pay the fee simply so they have a specific person they can get on the phone to point them in the right direction when something big goes wrong.

“They’ve set up the exact same business model as Tony Soprano: pay us to help protect you ... from us,” said one Amazon merchant whose business sells more than $10 million of goods annually on Amazon. “It’s messed up.”

This seller doesn’t pay for the program today but said he probably would in the near future as he hears more firsthand stories of merchants getting penalized or shut down for reasons they say are unfair or unclear. Referencing one claim in the recent indictment of Amazon consultants, which alleged a large cash bribe delivered via an Uber, the seller added:

“If my business got shut down overnight and I could send $100,000 in an Uber to fix it, I’m probably not going to do it but I’m certainly going to consider it.”