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Ombudsman warns Amazon about unfair contract terms

Mere weeks before Amazon is due to launch in Australia, according to Internet Retailing’s conversations with sellers and industry sources, the e-commerce giant has been reminded of its obligation to treat small businesses fairly in accordance with Australian law.

Kate Carnell, the Australian Small Business and Family Enterprise Ombudsman, has written to Amazon to ensure the company complies with Australia’s unfair contract terms legislation.

While Carnell said Amazon Marketplace presents an opportunity for small businesses to compete online and extend their reach, she has concerns about the contract terms its sellers must agree to.

An analysis of the Amazon Marketplace contract terms in the United States suggest they would have to be changed in Australia to comply with federal legislation, according to Carnell.

“From 12 November 2016, changes to the Australian Consumer Law protect small business from unfair terms in standard-form contracts,” she said.

“A standard-form contract is one that has been prepared by one party and where the other party has little or no opportunity to negotiate the terms.

“An unfair term is one that causes a significant imbalance in the parties’ rights and obligations and causes detriment to a small business if it were applied or relied upon.”

According to Carnell, Amazon’s United States terms and conditions allow the company to refuse service, terminate accounts, terminate rights to use Amazon services, remove or edit content, or cancel orders at its sole discretion.

“This may be considered unfair as action can be taken by one party, Amazon, but not the other party, the vendor, to terminate the contract,” she said.

Australian business owners Darren and Michelle Beecham, who sell through Amazon Marketplace in the US, previously spoke to Internet Retailing about this issue.

They cited one example when a customer in the US reported a problem with their store to Amazon during Black Friday, the biggest sales event of the year.

Amazon promptly suspended their account, halting sales.

By the time the Beechams refuted the claim, they had missed out on tens of thousands of dollars in sales. They said this is just a part of doing business with Amazon, and stressed that the positives outweigh the negatives.

However, this action may be illegal Down Under, following the recent changes to the Australian Consumer Law.

Carnell said she has requested that Amazon review the terms and conditions in use for standard form contracts in its Australian operations to ensure they comply with the unfair contracts terms legislation.

An Amazon spokesperson said the company will adhere to all local laws in its agreement with sellers.

“We look forward to launching Amazon Marketplace in Australia and providing thousands of small businesses and entrepreneurs with tools and services that help them to reach millions of customers and to expand their businesses both here and abroad. We will, of course, adhere to all local laws in relation to our agreements with Marketplace sellers,” a spokesperson for the company said.

Carnell also noted that different groups view the launch of Amazon Marketplace in Australia very differently.

“Some businesses are concerned about the threat of competition while others are excited to embrace the opportunity that Amazon offers,” she said.

“For consumers the Amazon Marketplace promises to expand choice and put downward pressure on prices.

“I’m interested to see how Australian small businesses can accelerate sales and broaden their customer base though the Amazon platform.”

This story has been updated to include Amazon’s comment. 

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