Amazon could face legal action from “hundreds” of sellers on its platform, as a result of the e-commerce giant’s decision earlier this year to freeze their funds until they could prove their VAT status.
A case is being prepared on behalf of those still unable to access their sales takings; many of whom are facing bankruptcy, and suffering “incredible stress” and “suicidal thoughts”, according to the law firm mounting the action.
Legal firm Rosenblatt said the amounts still “wrongly and unlawfully frozen” ran into “potentially tens of millions”. The action “will aim to win compensation for affected sellers and force Amazon to unfreeze their funds” it said.
In February, The Grocer reported that food and drink sellers on the Amazon marketplace were facing bankruptcy due to Amazon’s handling of its legal requirement to check the VAT status of businesses. Several spoke of being trapped in a “Kafkaesque” nightmare, in which they were repeatedly asked to send documentation already supplied, while the option to remove their stock from Amazon warehouses was removed and funds withheld.
Amazon’s approach to getting sellers to prove their status was met with ire from small business commissioner Liz Barclay, who said at the time: “The mental health issues I’ve been reading about have brought me to tears on several occasions”.
Under legislation introduced at the start of 2021, online marketplaces are required to collect and remit VAT on transactions involving overseas sellers. Because of the ease with which overseas sellers can set up a UK company and obtain a UK VAT registration number, Amazon and HMRC said they were moving to tackle this fraud by increasing due diligence on sellers on the marketplace.
Amazon laid some of the blame for the fiasco on HMRC which the company said had “changed what their standard is” for verifying a seller’s VAT status and location.
In the wake of the scandal, Amazon told The Grocer it had “already verified the majority of sellers” and was “taking this situation extremely seriously, committing additional resources to improve and speed up the process”.
But, according to Rosenblatt, “sellers continue to have their money withheld unlawfully” among them those with frozen funds totalling nearly £300,000.
“Amazon’s actions against sellers are not just causing financial harm – they are putting them through incredible stress. In scenes reminiscent of the Post Office scandal, they face being stuck in an automated process with Amazon’s appeal system,” Dean Nicholls, partner at Rosenblatt, representing affected sellers, said. “Amazon’s agreement with its sellers has very clear rules for what it can and cannot do. We believe that Amazon’s treatment of so many of its sellers is a clear breach of that agreement.”
Amazon told The Grocer its selling partners were ”incredibly important to us and our customers - and we do everything we can to help them grow and succeed”.
“Amazon is committed to providing a trustworthy shopping and selling experience, and we maintain a robust set of policies and guidelines for our customers and sellers to do business,” a spokesman said. “Over 100,000 small and medium sized businesses in the UK sell on Amazon’s store and more than half of all physical product sales are from independent selling partners, and the fact is that we only succeed when the businesses we work with succeed.”
One of Rosenblatt’s clients, speaking anonymously “for fear of further reprisals from Amazon” said they had been ”pleading with Amazon for nearly 18 months to unfreeze my funds”.
“I went above and beyond to provide them with invoices, supplier and buyer information, item descriptions, and quantities, yet I am still waiting to receive my money. It’s been a humiliating process. We work incredibly hard as sellers to meet all of Amazon’s criteria and standards, but they treat us like second-class citizens – ignoring us and sending automated emails. We’ve generated millions in sales and paid Amazon millions in commissions over the years, yet they have disregarded us and tried to keep our hard-earned money for themselves.”
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