Who’s Responsible for Defective Products Sold on Amazon?

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Amazon maintains that it is not responsible for products sold by third-party sellers. Pictured: Screen grab from FRONTLINE's documentary "Amazon Empire: The Rise and Reign of Jeff Bezos."

Amazon maintains that it is not responsible for products sold by third-party sellers. Pictured: Screen grab from FRONTLINE's documentary "Amazon Empire: The Rise and Reign of Jeff Bezos."

March 11, 2020

Who is responsible when something goes wrong with an item purchased on Amazon? For consumers, the answer isn’t always clear.

A federal appeals court in Pennsylvania is now weighing whether Amazon can be held liable for defective products sold by third-party sellers. The court’s decision could open the company up to a wave of lawsuits stemming from goods sold on Amazon’s Marketplace.

The potential implications for the e-commerce giant are huge. More than half of all sales on Amazon come from third-party vendors, who generated some $160 billion in sales on the platform in 2018.

Under Amazon’s current policy, the company takes no responsibility for flawed or defective items sold by these merchants. Customers can file claims based on product liability laws in each state. But when it comes to items sold by third parties on the marketplace, the courts have largely sided with Amazon. That is until last year.

“Until now, Amazon hasn’t been exposed to potential liability claims like brick-and-mortar stores,” said David Wilk, an attorney representing a woman in a pivotal case before the U.S. Court of Appeals for the Third Circuit.

The court was the first to reject Amazon’s claim that it can’t be considered a seller of products offered by third parties under state product liability law.

The case reaches back to 2015, when Heather Oberdorf was out on a winter walk with her dog Sadie. The dog’s collar, purchased on Amazon, broke when the animal lurched forward, Wilk said. Its retractable leash flew back and hit her in the face, leaving her partially blinded.

According to court records, both Oberdorf and Amazon were unable to locate the third-party seller to seek damages after the accident. So Oberdorf sued Amazon.

Like other e-commerce companies, Amazon argued it is not responsible for third party sales.

“Amazon makes clear in the conditions of use that third-party sellers sell products on the marketplace, and that those sellers, not Amazon, are responsible for the products,” the company said in a statement filed with the U.S. District Court in the Middle District of Pennsylvania in 2017.

But the average consumer has no idea that buying a product from an online marketplace might open them or their families up to risks, said Rachel Weintraub, legislative director and general counsel for the Consumer Federation of America.

“If these companies are successful in arguing that, because of innovation, they fall outside of traditional legal terms, it leaves consumers without a tool that the law traditionally provides them,” Weintraub said.

She added: “We don’t want to create more immunity for sellers of defective products.”

According to Oberdorf, the accident left her permanently blinded in the left eye. Many other lawsuits illustrate the potential risks of buying defective items on Amazon.com.

In 2014, a 23-year-old Missouri man died after his helmet came off in a motorcycle accident. The helmet was out of compliance with federal safety standards when it was purchased on Amazon, according to a Wall Street Journal report. Amazon denied it was the seller of the helmet. The company eventually settled for $5,000, but admitted no liability.

In 2016, a hoverboard caught fire, leading to an inferno that destroyed a home in Nashville, Tennessee. Two children jumped out of windows to escape the blaze. Court documents show Amazon had been aware the devices were catching fire, but an appeals court ruled the company was not the seller of the hoverboard under state product liability law. However, the court allowed the plaintiffs’ claim of negligence against Amazon to proceed to trial.

Oberdorf appealed her case and it was brought before the Third Circuit.

In a surprise 2-1 decision in July, a three-judge panel said Amazon was liable as a seller of products sold by third-party vendors. “We do not believe that Pennsylvania law shields a company from strict liability simply because it adheres to a business model that fails to prioritize consumer safety,” wrote Judge Jane Richards Roth in the panel’s majority opinion.

E-commerce leaders were alarmed by the ruling. The Internet Association, the Computer and Communications Industry Association and TechNet told the court the decision threatened to “undermine the development of e-commerce, and harm the U.S. economy.” Amazon sought a rehearing, and the court agreed to rehear the case with a full panel of judges.

The full court has the ability to reinstate, modify or reverse the panel’s finding. A decision is expected later this year.

But the case is already having an impact.

Just weeks after the Oberdorf ruling, a federal district court in Wisconsin said the company can be held liable as a seller in a case where a house was flooded due to a faulty bathtub faucet adapter sold on Amazon.

A month later, a federal district court in New Jersey referenced Oberdorf in the case of a boy who was injured by a scooter purchased on Amazon in 2015.

“Amazon’s control of the product, its relationship with the third-party sellers, and the structure of the Amazon marketplace all weigh in favor of finding that Amazon was a seller, not a mere broker or facilitator,” wrote New Jersey district court Judge Kevin McNulty.

The court ordered a stay in the scooter-injury case, halting any further legal action pending a decision from the Third Circuit appeals court.


Shantal Riley

Shantal Riley, Tow Journalism Fellow, FRONTLINE/Newmark Journalism School Fellowship

Twitter:

@shantalwriter

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