Amazon's biggest seller accused of fraud and lost 80 million

Discount advertisements on e-commerce platforms are very common and are an important way for sellers to attract consumers to place orders.

However, recently an Amazon seller was sued because of a limited-time discount advertisement and paid tens of millions of dollars in compensation!

1. Amazon sellers were sued for "limited time discounts"! They paid tens of millions in settlement

Not long ago, a total of 100,000 residents from California and Oregon in the United States sued Saatva, a major Amazon mattress seller, accusing it of false advertising for limited-time discounts displayed on its independent site, which violated California and Oregon laws.

In order to increase consumers ' "order rate", sellers often offer limited-time discounts. Saatva also adopted this promotional method and launched a limited-time discount campaign on its independent website platform. However, after placing an order, some consumers found that Saatva's limited-time discount was fake, because the brand's products on the entire website were always discounted outside the specific time shown in the advertisement, which means that Saatva's discount campaign is actually unlimited in time.

In response to this accusation, Saatva did not admit any wrongdoing, but in order to maintain its brand image and reduce the adverse impact of the lawsuit, Saatva decided to settle with the plaintiff and agreed to pay a settlement of approximately US$11.5 million (approximately RMB 80.64 million).

According to Saatva's settlement terms, the 100,000 people involved in the class action lawsuit will each receive $115 in compensation, paid in cash or e-commerce vouchers.

But it’s important to note that if participants in the class action want to receive compensation in the Saatva settlement, they must submit a valid claim form by October 27, 2024.

It is reported that the final approval hearing of the settlement agreement will be held on November 13, 2024.

Saatva is a well-known mattress brand in the United States. The company was founded in 2010 and is headquartered in New York . Saatva started with a direct sales model, mainly selling mattress products through independent websites, Amazon and other online platforms . It has performed very well in the market and is one of the earliest e-commerce companies with a DTC business model in the United States. Saatva's products include a variety of mattresses, such as memory foam mattresses , inner spring mattresses , adjustable mattresses , etc. Saatva's mattresses are well-known in the market for their high quality and comfort. The brand's flagship product is the Saatva Classic mattress, which can provide a variety of hardness and multiple sizes to meet consumers' different sleep needs and preferences.

(Image source: Saatva official website)

From 2019 to 2021, Saatva's performance ushered in a period of rapid growth. According to media estimates, in 2022, Saatva's annual revenue will reach US$500 million.

It is definitely disadvantageous for a company to be involved in lawsuits during a critical period of its development, and this is a class action lawsuit involving 100,000 local consumers in the United States.

This class action lawsuit also serves as a warning to sellers that they must ensure the authenticity of advertisements when conducting discount promotions to avoid facing legal risks due to false advertising content that misleads consumers.

2. Amazon’s home furnishing giant was fined $3.17 million for falsifying product origins!

The United States attaches great importance to the protection of consumer rights, and the local consumer rights protection organizations and management agencies are very sound. Not only do governments at all levels have special administrative law enforcement agencies to protect consumer rights, but there are also voluntary consumer organizations to protect consumer rights, such as the American Consumers Union, the American Consumer Federation, and the American Consumer Rights Commission.

When selling goods on e-commerce platforms in the United States, in addition to paying attention to the authenticity of the advertisements, you must also protect consumers' right to know and truthfully display the product's price, origin, producer, use, performance, main ingredients and other information. Otherwise, you will be suspected of violating regulations and will face varying degrees of punishment depending on the type of violation.

Not long ago, Williams-Sonoma, a popular home furnishing brand on Amazon, was fined $3.17 million by the Federal Trade Commission (FTC) for alleged false advertising by falsifying the origin of products and labeling goods imported from China as made in the United States.

Williams-Sonoma is a high-end home furnishings retailer in the United States and a major home furnishings seller on Amazon. Its high-quality home furnishings are widely recognized by the market. However, some of its brand products are imported from China, but are labeled with the "Made in the USA" origin label. In addition, it claims to be made in the USA when promoting its products on e-commerce platforms and brand websites, directly deceiving consumers.

According to documents from the U.S. federal court, the six products investigated by Williams-Sonoma were all marked as made in the U.S., but did not disclose information about their overseas processing or the presence of foreign raw materials. One of the products was actually made entirely in China. This was suspected of violating the regulations and was fined $3.17 million.

Previously, several companies have been fined by the FTC for falsely using the "Made in the USA" label.

Tractor manufacturer Kubota North America was fined $2 million by the FTC for falsely labeling the origin of replacement parts, and American kitchen appliance brand Instant Brands was fined $130,000 for falsely using "Made in the USA".

These companies' use of the term "Made in the USA" constitutes deception and misleading to consumers and is a serious violation of regulations.

Why do so many companies take the risk of using the "Made in the USA" label?

In recent years, the US government has continued to promote "Made in the USA" and encourage local consumers to purchase and use products made in the United States.

Starting from March 2022, the US government has further upgraded its executive order on "Buy American" and even has very specific requirements. For products purchased by the government, 55% of the products must be "Made in the USA".

In October 2022, the US government raised this ratio to 60%. It even proposed that the proportion of "Made in the USA" products should reach 65% in 2024 and 75% in 2029.

Previously, the US government stipulated that companies using government subsidies must purchase a certain proportion of equipment from within the United States, and the proportion is gradually increasing.

The "Buy American" requirement is mainly aimed at the construction of American infrastructure, advocating that American taxpayers' money be spent on products produced in the United States to bring economic benefits to the United States, and giving priority to purchasing domestic products. There are also tax incentives for products manufactured in the United States.

Driven by the government, American people are more willing to buy "Made in the USA" products.

In order to reduce costs, many companies will choose to purchase lower-priced goods directly from overseas and label them as "Made in the USA" for sale, or purchase raw materials directly from overseas and label them as local raw materials in the United States. This behavior is a direct deception of consumers and also violates local laws and regulations in the United States.

US law requires sellers to provide true, accurate, and comprehensive information when selling goods, and not to make false or misleading advertisements. Sellers must abide by the principle of fair trade and not deceive consumers. If sellers violate these regulations, in addition to the huge fines mentioned above, they may also face a series of legal consequences.

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