Amazon may face legal action from numerous sellers due to frozen funds.
- Sellers claim the freeze is causing severe financial and emotional distress.
- Legal firm Rosenblatt states withheld funds could amount to tens of millions.
- Amazon attributes the issue partly to changes in VAT verification by HMRC.
- Efforts are underway to resolve disputes and expedite verification processes.
Amazon is on the brink of facing a significant legal challenge from a large group of sellers on its platform. These sellers, numbering in the hundreds, are reportedly preparing a lawsuit due to Amazon’s decision earlier this year to freeze their funds. The freeze will remain in effect until sellers can adequately demonstrate their VAT status. This move has sparked outrage among many sellers, some of whom are encountering severe financial distress, with reports of looming bankruptcies and severe psychological impacts, including stress-induced health concerns.
The legal firm Rosenblatt, which is spearheading the lawsuit, has emphasized the substantial financial impact on the affected sellers. Rosenblatt reports that the funds that remain ‘wrongfully and unlawfully frozen’ could potentially reach tens of millions. The firm aims to secure compensation for these sellers and compel Amazon to release the frozen funds, alleviating the financial strain on small businesses that rely on these revenues for their operations.
Earlier reports from The Grocer highlighted the financial peril faced by food and drink sellers operating on Amazon’s marketplace. Sellers have described the situation as a ‘Kafkaesque’ nightmare, characterized by repeated requests from Amazon for documentation already provided. This has been compounded by restrictions imposed by Amazon, preventing sellers from retrieving their inventory stored in Amazon warehouses, alongside the withholding of their vital funds.
The crux of the dispute lies in Amazon’s stringent verification processes for VAT status—a response to legislative requirements introduced in 2021, mandating online marketplaces to oversee VAT remittance on transactions involving international sellers. Criticism has been levied from various quarters, including from the small business commissioner Liz Barclay, who highlighted the detrimental mental health impacts experienced by the sellers. Barclay remarked on the emotional toll after reading several distressing accounts from those affected.
Amazon has partially shifted the blame towards changes made by the HMRC, noting that these modifications in standards for verifying sellers’ VAT status and business locations have necessitated enhanced diligence. Despite the controversy, Amazon conveyed to The Grocer that the majority of sellers have been successfully verified and that they are prioritizing resources to accelerate the verification process further, aiming to resolve any outstanding issues efficiently.
Amazon’s efforts to address the VAT verification controversy continue amidst ongoing legal pressures from affected sellers.
