Small online merchants file suit against Amazon

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Small online merchants filed a class-action lawsuit Friday against Amazon.com, claiming the Seattle-based Internet giant violates its own terms, as well as Washington state law, by withholding payments from them for more than 90 days.

The suit, filed in U.S. District Court in Seattle, seeks full restitution of money "wrongfully obtained," plus financial interest and other unspecified damages.

The case follows a Seattle Times analysis last November of dozens of formal complaints filed by third-party sellers on Amazon's website. The analysis found that sellers who say they've been hurt by Amazon's practice of withholding payments were the single-most common source of complaints about the company filed with the Washington state Attorney General's Office over the past three years.

The lawsuit was filed on behalf of a Kentucky woman who sold DVDs on Amazon's site. She alleges that Amazon suspended her seller account last fall and held several hundreds of dollars in payments owed to her for 98 days.

A second plaintiff is a Texas man who sold flight training materials through Amazon and says he had several hundred dollars withheld for more than 100 days.

Amazon requires its third-party sellers to accept a "participation agreement" that gives it "sole discretion" to withhold payments for up to 90 days if it believes seller behavior could cause problems with customers.

Third-party sellers are a growing part of Amazon's business, accounting for about 40 percent of all products sold through its site. Amazon processes the payments, takes a cut of between 6 and 25 percent, and distributes the rest to sellers.

The suit argues that Amazon reaps "many tens of millions of dollars" annually from holding sellers' money.

"On information and belief, the annual volume of third-party sales in 2012 equaled or exceeded Amazon.com Inc.'s own sales of over $60 billion, which averages out to over $160 million in third-party sales per day, every day," the suit states.

"By holding on to this daily cash flow for only a few days or weeks, Amazon is able to invest this money in money market funds, marketable securities and other investments, and utilize the cash as working capital in the operation of its business."

An Amazon spokesman did not immediately return an email seeking comment Friday.