As Amazon’s marketplace grows, sellers face new compliance challenges
As Amazon’s marketplace grows, sellers face new compliance challenges
Amazon accounts for 40% of all e-commerce revenue in the United States. While the online retail giant’s dominance has continued to grow for more than two decades, the way Amazon operates its marketplace has changed significantly.
In 2010, third-party sellers (independent merchants selling products on Amazon) were responsible for roughly one-third of all units sold on the platform, according to Marketplace Pulse data. Today, 62%, or nearly two-thirds, are attributed to third-party sellers. For many e-commerce brands, Amazon has become a central sales channel rather than a supplemental revenue stream.
As the leading e-commerce marketplace, Amazon faces the ongoing challenge of policing counterfeit products and fraudulent sellers. Amazon has reported investing more than $1 billion in 2024 into AI innovation aimed at protecting customers and sellers from counterfeits and fraud. Amazon claims that these controls block more than 99% of suspected cases without requiring action from affected brands.
Amazon uses AI systems to detect counterfeit products and enforce seller policies, protecting customers and compliant sellers. However, automated enforcement and tightened requirements affect all sellers on the platform. Listings or accounts can be suspended unexpectedly, even for sellers following the rules. Some sellers violate guidelines unknowingly, while others are flagged incorrectly by automated systems. With third-party seller revenue exceeding $150 billion annually, occasional false positives are an inherent part of operations.
Rosenbaum & Segall, P.C., a law firm focused on compliance issues affecting Amazon sellers, examines how enforcement changes are affecting third-party merchants.
How Enforcement Affects Sellers
Third-party sellers have always been susceptible to Amazon’s enforcement actions, but the growth of automated compliance systems requires sellers to be more alert than ever. Since Amazon does not release public data on account suspensions, it’s difficult to assess how widespread enforcement actions are, but independent surveys offer partial insight, though results vary by methodology and sample size. Entresource reports that its survey of more than 300 sellers found that 22% have had their accounts suspended at least once. And a separate SmartScout survey of 325 sellers revealed that 35% of sellers have experienced an account suspension.
Another challenge for sellers is that the range of possible noncompliance issues has expanded. Where enforcement actions were once mostly intellectual property disputes from brand owners, sellers now face increased scrutiny over product safety documentation, regulatory certificates, and listing language that Amazon's automated systems flag as potentially violating Food and Drug Administration (FDA) or consumer safety rules.
When Listing Language Triggers Enforcement
Amazon’s automated reviews scan listings for terms associated with regulated products. In some cases, sellers unintentionally use a descriptive word that causes the listing to be flagged.
“Terms like ‘anti-microbial’ or ‘anti-bacterial’ are often used when describing apparel, for example,” said David Holmes, founder of Red View Ventures, a firm that manages Amazon seller accounts, “but they can trigger a pesticide review very quickly.”
As Amazon relies more heavily on automated systems to evaluate millions of product listings, enforcement decisions are increasingly driven by keyword interpretation and classification rules that may not be obvious to sellers operating across diverse product categories.
Counterfeit Claims and Temporary Listing Removals
In addition to automated compliance reviews, sellers also face challenges related to counterfeit claims. Brand owners and rights holders can submit complaints alleging counterfeit or inauthentic products from other sellers. In many cases, listings are temporarily removed until the accused seller can prove the product’s legitimacy.
While the reporting and investigation of counterfeit products is essential for protecting customers, brands, rights holders, and legitimate sellers, these reporting tools can be misused by sellers to harm competitors. Amazon prohibits false counterfeit reports, but listings may be temporarily unavailable, regardless of whether the claim is ultimately upheld.
The Cost of Downtime for Marketplace Businesses
Amazon’s enforcement actions can be temporary (until the issue is resolved) or permanent. Even temporary actions have a significant impact and create financial strain on sellers. For businesses that rely on Amazon as a primary sales channel, a suspended listing or account can decrease revenue and complicate relationships with suppliers and logistics partners.
Enforcement reviews often require sellers to wait for a response from Amazon before listings are restored. “It will take Amazon at least 24-48 hours just to respond to your request,” said Holmes. “So if you get hit with a compliance request and submit information immediately, you still might be down for at least two to three days.”
What Sellers Can Do if They Are Suspended
Lower-level actions typically focus on specific products or compliance issues that can be resolved if the seller provides additional information or documentation.
More serious cases fall under Amazon’s Business Solutions Agreement, including suspensions commonly referred to as Section 3 actions. Section 3 of the agreement allows Amazon to suspend or terminate a seller’s privileges when it determines an account may be associated with deceptive, illegal, or high-risk activity. These actions are often triggered by factors, such as suspected account linkage, repeated policy concerns, disputed counterfeit complaints, or signals that Amazon’s automated systems associate with fraud or misrepresentation.
The process for reinstating suspended accounts has grown increasingly complicated, according to many Amazon sellers and law firms. Section 3 suspensions can take weeks or months to resolve and often require legal assistance to overturn Amazon’s initial ruling. Sellers may receive a limited explanation and, in some cases, funds are withheld pending the review.
Scott Needham, founder and CEO of SmartScout, a tool for Amazon market research, said, “My biggest gripe is how often Amazon doesn't bring their best minds and resources on their end of resolution. There's an A team at Amazon, but they're not always the ones responding to your cases.”
Increased Oversight in Supplements and Consumer Goods
Sellers of dietary supplements, personal care products, and children’s goods are more likely to face compliance reviews for documentation, testing requirements, and product claims. These categories are subject to oversight from the FDA and the Federal Trade Commission, which results in Amazon watching sellers and product listings more closely.
In December 2023, the FDA issued a warning letter to Amazon regarding the inaccurate labeling of supplements. In the letter, the FDA cited products sold through Amazon that were labeled as supplements or foods but contained undeclared prescription drug ingredients.
In July 2024, the Consumer Product Safety Commission (CPSC) found Amazon responsible for hazardous products (specifically carbon monoxide detectors, hair dryers, and children’s sleepwear) sold by third-party sellers. Consumer Reports praised this outcome, calling it a “landmark decision.”
As a result of issues like these, Amazon’s enforcement scrutiny related to consumer health and safety has intensified in recent years. In 2024, Amazon updated its policy, requiring all dietary supplement products to be verified through a third-party testing, inspection, and certification (TIC) organization. Amazon's automated systems identify listings that may require additional review, and sellers must be able to provide all documentation required.
While Amazon’s enforcement systems are designed to protect consumers and legitimate sellers, the heightened scrutiny adds complexity for businesses operating in regulated product categories. Sellers must stay up to date on rules and guidelines that can be complicated or change quickly.
Cross-Border Selling Increases Compliance Challenges
Amazon operates separate marketplaces across dozens of countries, each subject to unique consumer protection laws, product regulations, and reporting requirements. According to Jungle Scout, 46% of Amazon’s U.S. sellers also sell in at least one international marketplace.
While all Amazon sellers encounter compliance challenges, international sellers and those operating in multiple countries face the biggest hurdles.
Because Amazon’s systems link related accounts and business entities, an issue originating in one marketplace may impact seller operations elsewhere, even when the underlying rules differ by jurisdiction.
“It’s very easy to run things in one country that get completely shut down in another,” said Needham. “Understanding the nuances internationally is nearly impossible, if we’re being honest. Amazon is always changing, and so are the government agencies overseeing consumer products.”
What Amazon’s Enforcement Model Signals Going Forward
While Amazon’s automated compliance systems catch most of the issues they’re designed to prevent, they also introduce complexity and sometimes confusion for sellers. Sellers should audit their product listings for compliance language, maintain certificates of analysis and third-party testing reports, and ensure all documentation is current and readily accessible before enforcement actions occur.
Compliance standards continue to change, and enforcement decisions are often made through systems designed to prioritize speed and efficiency over individual nuance. As a result, even experienced sellers may encounter issues. When these issues arise, sellers must be familiar enough with the rules and regulations to communicate with Amazon or seek professional assistance.
This story was produced by Rosenbaum & Segall, P.C. and reviewed and distributed by Stacker.
