Section 3 of the Amazon Business Solutions Agreement: Summary, Analysis, and Interpretation

Amazon Business Solutions Agreement – Part 1

Amazon’s Business Solutions Agreement is a multisection agreement containing legally enforceable rules and policies that govern the rights and obligations of sellers who use the platform to sell goods to the consuming public. It covers several categories of legal issues, including seller performance, sales tax collection, product safety, Amazon’s liability for sellers’ products, and the resolution of disputes between Amazon and sellers, among others. This agreement is a "living document , " meaning that Amazon periodically revises it to implement changes to its Terms of Use. Be aware that several times a year, Amazon will notify you of changes to the Business Solutions Agreement, and you must affirmatively accept them (via clicking a button) before you may continue to list and sell items on the Marketplace.
At times, the Business Solutions Agreement will be referenced as the "Marketplace Participation Agreement," or "Amazon Services Business Solutions Agreement."

In-Depth Review of Section 3

Section 3 of the Business Solutions Agreement ("BSA") covers Accepted Policies for Sellers: 3.1 Terms of Use, 3.2 Selling Policies, 3.3 Data Protection Policies, 3.4 Return Policies, 3.5 Electrons on Demand Policies, 3.6 Digital Services Content Policies, 3.7 Conduct Policies, 3.8 Marketplace Fair Pricing Policy, 3.9 Restricted Products.
Clarifying 3.1 Terms of Use, Section 3.1 deals with Amazon general Terms of Use, Terms of Use for Sellers, Conditions of Use, Account Terms and A to Z Guarantee Dispute policies.
Clarifying 3.2 Selling Policies, Section 3.2 sets out the policies that all sellers are required to follow.
Of particular interest is section 3.3, which covers our Terms of Service for Data Protection. In terms of the collection of data, read it carefully. We have seen a number of issues arise under the UK’s Data Protection Act 1998 and EU’s General Data Protection Regulation (GDPR).
Clarifying 3.4 Return Policies Sellers are strongly advised to work out their return policy based on the country of sale and be ready to refund customers. Sellers have found that buyers can open up a chargeback/claim if a refund is not handled in due course.
Clarifying 3.5 Electrons on Demand Policies, Section 3.5 requires sellers to comply with Digital Services and Content Policies.
Sellers should always think about how they will comply across all regions they sell. Section 3.5 allows sellers to learn more by following the provided hyperlink in the section to the policy document.
Clarifying 3.6 Digital Services Content Policies
Digital Services Content Policies are an agreement sellers enter into, so check the wording carefully. Compliance is key and it is advised to fully understand how you will charge, take returns, refunds, collect VAT, etc. before agreeing to terms.
Clarifying 3.7 Conduct Policies, Section 3.7 sets out general Conduct Policies that all sellers are required to follow.
Ensure you read all of the policies and guidelines, as these are reviewed and updated regularly.
Finally, section 3.8 covers the Marketplace Fair Pricing Policy. Section 3.9 covers Restricted Products. If you have any issues selling goods on Amazon, or have a product that you wish to challenge, seek legal advice.

Consequences for Sellers

Section 3 applies to sellers of offers and products sold on or in through the Amazon.com Marketplace or any similar sites or applications (collectively, "Marketplace"). Section 3 provides that, if a customer fails to receive an ordered product due to seller fault, then the seller must refund the full cost of the product to the customer. Furthermore, if a customer returns a product, the seller may only discount the refund by a prescribed shipping allowance. All refunds must be made at the time prescribed by the seller policies.
While the cost of the product must be refunded fully, the Terms allow the seller to refund a discounted amount for the costs of shipping and insurance if those costs are listed in the refund policy. Section 3.7 outlines seller requirements in the event a consumer makes a warranty claim. Sellers’ Products cannot be subject to "excessive defective rates," which are generally capped at 3%. Excessive defective rates are calculated based on the total number of defect claims a seller receives divided by the total number of units sold by the seller to customers through the Marketplace during a certain assessment period.
The Terms expressly set out that sellers are liable for alleged product defects, compliance with applicable laws, and warranty claims for the products and offers that they sell. Therefore, a seller may not rely on any contractual relationship with the manufacturer, distributor, supplier, importer, or other third party for reimbursement of these costs. Moreover, the Terms contain language, akin to an indemnity for breach of such Terms, that a seller shall not attempt to limit the damages that will be recovered by the customer as a result of breach of the Terms by the seller.
Collectively, these provisions are significant as many of the seller requirements are vague and lack crucial practical advice for the sellers. The vagueness of Section 3, and the manner in which it is applied, creates substantial risks for Amazon sellers. The implication of such provisions is that a seller must ensure they operate well within those limits, and establish their own provider indemnities, even if Amazon requires them to indemnify Marketplace users.

Frequently Misunderstood Aspects of Section 3

One immediate misconception that can develop when reading Section 3 is that all clauses are applied to all Sellers. The first sentence sets the tone by stating: "In recognition of the independent contractor status of the parties hereunder, Seller waives any protections afforded by the following provisions." The first listed protection to be waived is the right to participate in a collective or other joint bargaining process. Some Sellers interpret this as incorporating any labor laws and prohibitions against unfair labor practices into the contract. However, all this clause does is waive the right to engage in any collective bargaining.
The second clause waives all policies that agreement to an arbitration provision is prohibited. While this section does indeed prohibit a Seller from claiming that it cannot agree to arbitrate certain disputes, it does not prohibit other claims regarding the scope of arbitration. For example, a Seller could still argue that certain disputes (e.g. , antitrust) should not be forced to arbitration when their they become entangled with public policies.
The third clause is the potential source of confusion for many readers. It incorporates all covenants and obligations of any other contracts between the parties into this Agreement. The concern for many Sellers is that this clause can lead to unintended consequences if the seller agrees to another agreement that it believes is quality neutral. Once the other contract is incorporated into the Business Solutions Agreement, it is unclear whether the quality of the terms are or are not fair. Any contract of which the Seller is a party or subsequently becomes a party to will have a potentially undefined impact on the Seller’s relationship with Amazon.
Also, including the business name in the Business Website URL can create a larger issue of how deeply the Business Name is integrated into Amazon.com. Imagine a Seller negotiating agreements with Amazon regarding the use of its physical stores to offer products, and then incorporating the seller’s business name into some aspect of the deal. It may be fine to allow Amazon.com to use the Seller’s business name in its video gaming store, but what happens when the Seller tries to expand operation into other retail locations through Amazon?
These are just a few examples of how Section 3 can be misinterpreted and there is no doubt plenty of room for creative interpretation and novel legal theories.

Recommendations and Strategies for Section 3 Compliance

When it comes to engaging in best practices for compliance with the provisions in section 3, the Golden Rule should apply. Essentially, sellers should treat others the way they would want to be treated if they were a consumer of their product or service. For example, sellers should:
Be 100% transparent. Transparency is the best way to build trust with customers on Amazon and prevent negative product reviews or other customer complaints. In section 3.2(B), substitute sellers agree to provide complete and accurate information, including all required disclosures, in Amazon listings and promotions, including any disclosures that would ordinarily comply with the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising ("Endorsement Guides"). If you would want to know more about a product before buying it—and to be able to trust that no material information is left out—a substitute seller should provide that information.
Follow the platform’s policies and requirements. Substitute sellers are expected to follow all of Amazon’s policies and requirements. With that in mind, it is essential that substitute sellers familiarize themselves with Amazon’s policies and offerings. You can find a lot of this information on Amazon’s Seller Central site. For example, under the "Policies and Agreements" section, you can find such policies as the Seller Code of Conduct, Selling Policies and Seller Agreement, and Returns, Refunds and Order Cancellation Policies. You can also find forums where you can interact with other Amazon sellers and Amazon representatives to get answers to questions or share information. Not all Amazon policies and requirements may be found on the Seller Central site, however. For example, policies governing other areas of the Amazon Business program may be located on Amazon Business’s Help page.
If you do not understand a policy, or cannot find it online, contact Amazon directly. With e-commerce business models changing rapidly, Amazon is continually updating policies, terms and conditions. If you have a question or concern about a policy it is best to directly contact Amazon for clarification.

Recent Changes and Amendments

Recently, there have been a few changes made to Section 3 of its Business Solutions Agreement. In particular, Amazon added a subsection (g) entitled "Product Ratings and Reviews." This section explains that only authentic Ratings, Feedback, and Reviews are allowed to be posted by Customers and that Amazon may modify, remove, or not post all or any portion of a Rating, Review, or Feedback for any reason.
Amazon also pared back its "Unfair Selling Activities" policy in Section 3(b). Specifically, the prior enumeration of the types of activities prohibited under this section has been replaced by a catch-all , wherein Amazon reserves its discretion to determine if an activity is "unfair." Given that Amazon had already recently added language in Section 3(i) entitled "Additional Policies," which contained a statement providing that any violation of Amazon policies or agreements may result in suspension or termination of Amazon privileges, it is unclear why Amazon chose to remove the list of prohibited activities from Section 3(b). The removal of the list of prohibited activities, including the prohibition against "circumventing our fees or other charges," leaves Amazon with greater flexibility as to which seller activities are considered unfair, which may result in fewer seller defenses against account terminations and other adverse actions.