Amazon does this - in the UK there's companies like John Pye who do 'remaindered goods auctions'. There's a John Pye warehouse less than half an hour from this specific Amazon warehouse.

But they've not been able to do their normal auctions during the pandemic, and I expect remainder auction places have full warehouses and staffing issues. So if they're not able to take the excess stock from Amazon, Amazon's next easiest option is to dump it in the landfill.

(Source: I've bought a lot of stuff from that John Pye warehouse, including Amazon returns, and live locally to the Amazon warehouse in question.)

Amazon does sell/auction pallets of products, but it's probably their own inventory (not sure).

So most likely they won't do it for legal/logistical reasons.

Remember that Amazon doesn't move a finger if you don't pay them.

I don't see people paying amazon to have their products auctioned and amazon profiting from it. Neither I see how Amazon would split the bid between sellers. Who would be liable for that item?

You're not naive, you have products being mande and shipped from China to be destroyed in Amazon Fulfillment Centers. It's absurd.

But I guess it's the price of globalization.

I'm not clear on the terms of the contract. If your inventory is stranded, then does Amazon have the right to donate it or resell it themselves? It seems plausible they wouldn't have that. If it's a product they don't list, would Amazon even want to assume the extra liability for selling it directly?