Chinese Companies Sue Amazon Over Bans for Paid Reviews

Amazon
(Source: COMEO)

A recently published court document shows that a collection of Chinese companies have filed a class action lawsuit against Amazon in the United States District Court for the Northern District of California on September 13, accusing the platform of illegally banning and withholding funds on the grounds of paid reviews, and demanding that they “[take] back the funds illegally and improperly detained by Amazon.” The e-commerce platform has yet to comment on the matter.

Earlier, Vice President of Amazon Cindy Tai said in an interview that last year, the platform cracked down on companies that solicited paid comments, claiming that it had permanently banned 600 Chinese brands with 3,000 merchant accounts. She said that the crackdown on business accounts was not aimed at China as a country, and that businesses from other countries were also involved. Besides, she added, it did not affect the overall business growth of Chinese merchants on Amazon platform.

However, according to a report by Chinese magazine Globe on September 9, on April 30 this year, Patozon, which used to be a big seller on Amazon, first suffered rectification from the platform, and 606 of its best-selling products were removed with a large amount of funds being frozen. Since then, top sellers in Shenzhen, such as Aukey and Sunvalley, have been closed, products removed and funds frozen. At the beginning of July, nearly 340 sites of well-known cross-border e-commerce company YKS were closed, and the frozen capital was as high as 180 million yuan ($27.833 million), which became the heaviest known case of Amazon cracking down on domestic sellers.

In this crackdown storm, the reasons given by Amazon are mainly the violating of regulations by sellers, including the use of “paid reviews.”

“If it is only for the rectification of these violations, we welcome it. This kind of behavior such as paid reviews has affected many sellers who are serious about their brands, causing bad money to drive out the good.” At first, many sellers held such a view, but with the continuous expansion of the crackdown, they found that the move this time seemed unusual.

According to the report, “In the past, even if Amazon decided to ban an account, it would inform the seller by email in advance, giving the seller a chance to explain and defend. But this time the ban comes so suddenly that the store link could not be opened directly. Many sellers didn’t even know what was wrong. After 90 days, the funds in the account were directly removed and the balance was cleared, while Amazon did not give any explanation.” Xie Zhuoheng, Secretary-General of the Shenzhen Cross-Border E-Commerce Association, said that since the crackdown, the association conducted a timely group survey on the banned sellers.

SEE ALSO: Amazon the Monopoly Takes on Unruly Chinese Firms

“After communicating with some sellers, their feedback is that Amazon has frozen a wide range of funds. Not only is all the money in the accounts which violated the rules frozen, but even the money in the related accounts is frozen,” said Wang Xin, executive director of the association, adding, “And an account often sells many kinds of products. It may only be a product that involves violations, but Amazon has frozen the funds in the entire account.”