Amazon faces lawsuit over liquidation program practices and alleged FBA seller fraud
Xcess Limited files lawsuit against Amazon Services over claims of systemic overcharging in liquidation program and contract termination.
A liquidation company filed a lawsuit against Amazon.com Services LLC on December 18, 2024, alleging the e-commerce giant knowingly allowed third-party sellers to manipulate its liquidation program, according to court documents filed in the United States District Court Northern District of Ohio.
The complaint, filed by Xcess Limited, one of the largest inventory liquidation companies in the United States, details how Amazon's algorithm for determining liquidation pricing allegedly enabled fraudulent practices by some FBA (Fulfillment by Amazon) sellers starting in 2020.
According to the legal filing, Amazon Services contracted with liquidators to purchase excess inventory from its retail business. In 2020, Amazon expanded this program to include FBA seller inventory stored in its fulfillment centers. The lawsuit states that this expansion created an opportunity for what the plaintiff describes as "unscrupulous FBA Sellers."
The court documents reveal specific examples of alleged price manipulation. Some sellers listed smartphone cases for hundreds of dollars, while others priced single-letter alphabet sweatshirts significantly above market value. According to the filing, these inflated prices were then used by Amazon's algorithm to calculate liquidation values.
Xcess Limited's relationship with Amazon began in 2016. By 2019, the company provided liquidation services for over fifty Amazon fulfillment centers nationwide. The most recent agreement, dated September 15, 2022, covered more than sixty facilities, including seven in Ohio: Etna, Euclid, Groveport, Monroe, Lockbourne, North Randall, and West Jefferson.
The legal documents state that Amazon acknowledged the pricing issues in communications with Xcess but allegedly failed to address the problem with FBA sellers. Instead, Amazon Services instructed Xcess to review invoices containing millions of line items to identify improper charges.
The situation escalated in May 2024 when Amazon Services implemented a new policy requiring credit requests for fraudulent charges to be submitted within two weeks of invoicing. On July 26, 2024, Amazon Services removed all fulfillment centers from Xcess's liquidation contract, followed by a complete termination notice on July 30, 2024.
The lawsuit also includes allegations of defamation. According to the filing, an Amazon Services Manager made statements to Liquidity Services that allegedly interfered with Xcess's business negotiations. The complaint states these actions occurred after Amazon Services sought new bids for liquidation services at its United States fulfillment centers in June 2024.
The case raises questions about oversight of third-party seller practices and algorithmic pricing systems in e-commerce liquidation programs. Xcess seeks damages for breach of contract, violations of the Washington State Consumer Protection Act, tortious interference with business relationships, and defamation.
The lawsuit provides insight into the complexity of e-commerce liquidation operations, revealing that weekly invoices typically contained millions of line items across ten to one hundred dispatched loads of assorted products. The case is filed under Civil Action No. 5:24-cv-2205 in the United States District Court Northern District of Ohio, Eastern Division.
Amazon Services has not yet filed a response to the complaint as of January 4, 2025.