Distributor Diversion on Amazon: How Your Product Leaks, and How to Close the Leak

When a brand owner first finds five strangers selling their product on Amazon, the first assumption is usually counterfeits or theft. Sometimes that’s true. Most of the time it isn’t. Most of the time, the product came from someone the brand sold to.

That’s diversion: genuine product sold through your normal channels that ends up somewhere you never intended it to go. On Amazon, it shows up as unauthorized sellers undercutting your price.

How product actually leaks

From what we see across accounts, diversion almost always comes through one of these doors:

• A distributor selling out the back. They hit a volume tier, earned a rebate, and moved the extra units to an Amazon reseller to make the numbers work.
• A retail account dumping overstock. A seasonal buy didn’t sell through, and the product went to a liquidator who sold it to resellers.
• A terminated dealer clearing inventory. You ended the relationship. They still had product. It went to Amazon.
• Promotions being arbitraged. Someone buys heavily during your own discount and resells on Amazon after the price goes back up.
• International or institutional pricing. Product sold at a lower price for a specific market or buyer type ends up back in the US retail channel.

Notice that in every case, the product is real. That’s why Amazon won’t remove these sellers for you. Selling genuine product isn’t against Amazon’s rules. Our post on counterfeit vs. unauthorized sellers explains why the distinction matters so much.

Why diversion starts in the first place

This is the part brands don’t like to hear: diversion is usually caused by your own pricing structure.

If your volume discounts or rebates reward a distributor for buying more than their market can absorb, some of that excess will find its way to Amazon. If your wholesale price is far enough below your MAP that a reseller can buy, sell under MAP and still make money, someone will.

You can chase sellers forever. If the economics that create them stay the same, new ones appear.

Finding the source

Before you can fix diversion, you have to know where it’s coming from. The reliable method is test buys combined with lot or batch codes:

1. Buy from each unauthorized seller.
2. Record the lot code, date code or serial number on what arrives.
3. Match it against your shipping records to see which customer received that lot.

We walk through the full process in how to trace diverted inventory with lot codes and test buys. Since March 2026, every reseller’s FBA units also carry that seller’s own Amazon label instead of being pooled with yours, which makes the chain cleaner. See Amazon’s new barcode rule.

Closing the leak: the fixes that hold

1. Put resale limits in writing. Your distributor and dealer agreements should say whether they may sell online, on which marketplaces, and whether they may sell to other resellers. If your agreements are silent, you have very little to enforce. Our guide to authorized reseller agreements covers what to include.

2. Fix the incentive that feeds it. Look at volume tiers, rebates and promotional pricing. If a distributor earns more by overbuying and dumping than by selling to their real market, the agreement is working against you.

3. Have the conversation before the threat. When a lot code points to a specific distributor, the first call should be a business conversation, not a legal letter. Often they didn’t know, or a salesperson made a side deal. Many brands solve most of their problem in this one call.

4. Follow through when it doesn’t stop. If a partner keeps diverting after being told, you need to be willing to change terms or stop selling to them. A policy you won’t enforce isn’t a policy.

5. Hold a consistent price policy. A MAP policy that actually holds up, applied the same way to everyone, removes most of the reason to divert in the first place. Have your attorney review how it’s structured; there’s a right way and a wrong way to do this, which we cover in is MAP pricing legal.

What not to do

• Don’t send threatening letters to every seller at once. It burns credibility and rarely works on sellers who know their rights.
• Don’t file IP complaints against genuine product. Filing false infringement reports can get your own Brand Registry access restricted.
• Don’t punish your best distributor without evidence. Lot codes first, conversation second.

Why this is worth fixing

Diversion isn’t just an Amazon problem. When your retail buyers open Amazon and see your product well under their shelf price, it becomes a wholesale problem. We cover that in when your retail partners find your product cheaper on Amazon. And if you plan to sell the business someday, an uncontrolled channel is something a buyer will discount for.

If you’d like to see which sellers are on your listings right now and roughly where the product is coming from, start with our free channel scan.

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Written by

Troy Marchand, CEO

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