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Amazon mistakenly suspends Samsung sellers before holidays

An attendee tries out a Samsung Electronics Co. Gear VR headset during a media event in Seoul, South Korea, on Thursday, Aug. 11, 2016.
SeongJoon Cho | Bloomberg | Getty Images
An attendee tries out a Samsung Electronics Co. Gear VR headset during a media event in Seoul, South Korea, on Thursday, Aug. 11, 2016.

Amazon.com has been a rough place this holiday season for sellers of Samsung products.

In mid-November, just ahead of the Black Friday and Cyber Monday rush, a number of online sellers of Samsung phones, chargers, cables and TVs were booted from the e-commerce site because of apparently mistaken claims of infringement.

The suspensions were based on notices of inauthentic sales that were sent to Amazon from the e-mail address samsung@enforcements.markmonitor.com. MarkMonitor is a digital brand protection agency.

But Amazon got it wrong.

The Seattle-based company told third-party sellers by e-mail as recently as last week that, "upon further investigation, we have determined that samsung@enforcements.markmonitor.com did not submit the report."

The e-mail went on to say, "Rather, Richard Nelson of Sideman & Bancroft LLP (rnelson@sideman.com) submitted the Intellectual Property complaint on behalf of Samsung."

Amazon is admitting that during the busiest shopping season of the year it incorrectly identified the source of an infringement complaint that led to multiple seller suspensions. The company is now saying that the claim was submitted by Nelson, a San Francisco-based attorney who specializes in IP and fraud enforcement.

"How could sellers be so badly misdirected to the wrong agent?" said Kelly Johnston, a former risk investigations manager at Amazon who now helps sellers with compliance issues on the site. "From an operational perspective, this is a massive failure."

An Amazon spokesperson declined to comment, and a representative for MarkMonitor didn't respond to a request for comment. An e-mail to Nelson requesting comment was forwarded to Samsung. The company never provided an explanation.

Johnston said her firm, Cascadia Seller Solutions, represents several clients who were suspended from Amazon because of the Samsung issue and not all of them have been reinstated. One merchant, who spoke on the condition of anonymity for fear of retribution from Amazon, said he was shut down until after Cyber Monday, and knows of other Samsung sellers who were just readmitted last week.

While this particular matter only affected a small number of sellers out of the millions on the platform, it further illustrates the chaos that merchants are experiencing trying to navigate Amazon's rapidly growing marketplace. In response to an influx of counterfeit products and the negative publicity that followed, Amazon has aggressively clamped down on infringers by responding to complaints and shutting down accounts.

Another way Amazon has tried to clean up the site is by expanding its use of so-called brand gating — forcing third-party sellers to pay a fee to sell big brands after first proving the inventory was properly sourced. In August, sellers of brands including Nike, Adidas and Hasbro had to start providing invoices from manufacturers or distributors showing the purchase of 30 items within the last 90 days.

Certain categories like electronics and software are increasingly risky for third parties, as companies like Samsung, Apple and Microsoft try to weed out fakes and unauthorized sales. The crackdown isn't just on Amazon. Earlier this month, New York police raided a warehouse in Brooklyn and seized more than $7 million worth of inauthentic Samsung and Apple items.

Sellers on Amazon recognize that the marketplace is changing, but they expect to be treated fairly. Chris McCabe, a former Amazon employee who, like Johnston, is now independently helping sellers, said the Samsung case illustrates the shortcomings of Amazon's procedures.

"There's no effective process for verifying that the party sending in the infringement form is accurate or legitimate," McCabe said.

McCabe has been able to restore some of his clients' accounts, but only after they went weeks without any transactions.

Sellers are typically warned of infringement claims at least a few days before being suspended, and they're referred to the relevant brand agent to try to clear things up. Of course, that only helps if they're given the correct information.

An Amazon-branded Boeing 767 freighter, nicknamed Amazon One, flies over Lake Washington during the Seattle Seafair Air Show on August 5, 2016 in Seattle, Washington.
Stephen Brashear | Getty Images
An Amazon-branded Boeing 767 freighter, nicknamed Amazon One, flies over Lake Washington during the Seattle Seafair Air Show on August 5, 2016 in Seattle, Washington.

For Amazon, this is the price of extraordinary success. The company is poised to record 28 percent sales growth this year and generate close to $100 billion in e-commerce revenue.

Much of Amazon's ongoing effort to transform commerce relies on establishing and managing a comprehensive platform with the best prices and widest array of products. Protecting brands without punishing honest sellers in the process is proving to be quite the challenge.

"They're caught in the middle," said Johnston. "They want to make sure rights owners are happy, but they also don't want to alienate every seller."