U.S. Safety Regulator Files a Product Liability Suit against Amazon

U.S. Safety Regulator Files a Product Liability Suit against Amazon

In July 2021, the U.S. Consumer Product Safety Commission (“CPSC) decided to go after Amazon.com Inc. and filed a suit seeking to force Amazon to participate in formal recalls of dozens of defective products sold by sellers on its widespread marketplace. In the Matter of Amazon.Com, Inc., CPSC Docket No.: 21- [1]

Over the recent years, many people have claimed to have been harmed by products such as hover boards, defective batteries or faulty dog collars purchased on the company’s website. However, in response to such claims, Amazon has argued that it is not liable as the products have been sold by a third-party seller.

Several courts have sided with Amazon by referring product liability laws that has never contemplated online shopping or digital middlemen. In the matter of Oberdorf v. Amazon.Com Inc., 2020 WL 3023064 (3rd Cir. 6/2/20), the plaintiff had purchased a dog collar on the website of Amazon.com, sold by a third-party seller. During its use, the collar broke which resulted in injuries to the plaintiff’s dog. Consequently, the plaintiff sued Amazon.com claiming strict liability as it “facilitated and participated in the sale and distribution of the subject dog collar.” The district court found in favor of Amazon. However, the same was vacated by the Third Circuit. Thereafter, Amazon filed for rehearing en banc, which was granted. The En Banc court considered the Pennsylvania law and ruled against the liability of Amazon.

However, to address the rising trend of such claims, the U.S. safety regulators sued Amazon, and have alleged that Amazon is a distributor of consumer products under federal law. If the same is proven in trial, then Amazon would be subjected to future mandatory recalls on behalf of its sellers. Further, declaring the company as a distributor would uproot a commonplace tech industry defense deployed by tech-giants such as Facebook and Google, which claim that they aren’t responsible for goods posted or sold on their platforms.

The present claim rises from an often misunderstood feature of Amazon’s retail empire. It is perceived that most items sold on Amazon.com aren’t owned by the company located in Seattle. Technically, the products are sold by third-party sellers, a category which includes established brands, mom-and-pop crafts makers and an enormous amount of Chinese manufacturers and distributors. In return, Amazon charges a commission and other fees from these sellers. Further, Amazon is also responsible for shipping and handling of the products, under a program called “Fulfillment by Amazon”. For the same, it charges sellers to store their items in its warehouses and send them from the warehouses when the customers click “Buy Now”. This business model has aided rise of Amazon in the online marketplace by many folds. However, a marketplace where seller signs up and companies such as Amazon are responsible for their listings and provide self-service tools, have become increasingly difficult to control and patrol. Therefore, when consumers sustain any harm by use of unsafe or counterfeit products, they have a very little choice but to try to sue a company which refuses to have any liability.

Another factor comes into play, viz., that the product liability rules are set at the state level, and therefore a California ruling whereby Amazon was held liable for burn injuries sustained by the plaintiff due to damaged hover board bought on the company’s website, would not affect a ruling given in Texas in favor of Amazon. Kisha Looms v. Amazom.com LLC, Los Angeles County Super. Ct. No. BC632830. The company often asserts that it provides a neutral marketplace, and connects buyers and sellers, and that it is protected from liability because other companies wrote item descriptions and arranged for product delivery. It also resorts to Section 230 of the Communications Decency Act, which provides immunity to web platform from content created by others.

With the recent suit filed against Amazon, the regulators are trying to side-step the old defenses used by Amazon and focusing on Amazon’s vast logistical operation. The CPSC has alleged that products store and shipped by Amazon satisfy the definition of distributor as laid out in the Consumer Product Safety Act, thereby giving the agency the power to compel Amazon to cooperate with recalls of third-party products and levy penalties when it defaults. Prior to the lawsuit, Amazon has worked with CPSC to set up a voluntary system in which the company and other marketplaces would coordinate recalls on behalf of their sellers.

The suit brought by the regulator might bring a much needed clarity to question which has been a point of confusion before courts and state legislatures nationwide, as to who is responsible when a faulty product bought from the company’s website hurts or kills someone.

[1] Complaint at: https://www.cpsc.gov/s3fs-public/pdfs/recall/lawsuits/abc/001-In-re-Amazon-com-Inc__.pdf?TvLLxHy1UMfiz3BpfXaKjQy1ibQbYAiU