By Sarah Doberneck.
Defective products pose a risk of personal injury and property damage to consumers. Because of this, manufacturers and sellers have been held liable for injuries arising from these items for well over a century. Yet, as technology advanced and led to the creation of online marketplaces, the definition of what constitutes a “seller” for products liability purposes is up in the air.
Amazon.com, the giant online marketplace, has been at the center of this issue for the past several years. While early court decisions held that Amazon was not liable for defective third-party products, some states have recently found that Amazon’s integral role in facilitating the sale of products justifies holding the company liable.
Understanding when online marketplaces such as Amazon can be held liable for defective products is important; injuries from these products can be severe and holding the third party seller or manufacturer liable may be impossible. These companies are sometimes based in foreign countries, not subject to United States jurisdiction, or sell products under a fictitious name, making them difficult or impossible to locate. As Amazon has adapted its business model to accommodate third-party sellers rather than rely on its own direct sales, the risk of injured consumers having no remedy increases as long as Amazon is not liable as well.
STRICT PRODUCT LIABILITY FOR SELLERS AND MANUFACTURERS
Courts recognize the undue risk that defective products have on consumers by holding sellers and manufacturers liable for injuries caused by these products—regardless of whether the consumer contracted with the seller directly or personally contributed to the accident. This doctrine, known as “strict product liability” is strongly supported by public policy considerations. For one, people reasonably expect products sold in the marketplace to be safe and should be able to rely on that expectation. For another, manufacturers and sellers are in a better position than the consumer to absorb the costs of resulting injuries.
The strict product liability doctrine was developed with traditional brick-and-mortar retailers and distributors in mind. The rule applies to any company or person engaged in the business of selling products for use or consumption; it therefore includes manufacturers, wholesale or retail dealers, and distributors. For products Amazon sells directly, there is no real question that the company is liable as any other seller would be. But where a third-party lists their product on Amazon.com, courts have been reluctant to apply strict product liability to Amazon as well because it does not fit clearly within this definition.
In November 2020, the Ninth Circuit Court of Appeals, applying Arizona law, found that Amazon was not a “seller” and thus not liable for a defective third-party product. In that case, the court looked at several factors previously established under Arizona product liability law. The court noted that Amazon stored the third-party product, put it into an Amazon box, mailed it to the customer, and received a fee from the third-party seller for its services. However, the fact that Amazon did not take title to the product, the transaction fee was “only a small benefit”, and the third-party seller’s name was listed on the website and receipt, meant that Amazon was not a seller under Arizona law. Thus, Amazon could not be held liable for injuries caused by the defective product.
WHY IT MATTERS
Fortunately for Arizonans, this case was not published and therefore Amazon cannot use it as precedent in the future to argue that they are not subject to the strict product liability doctrine in Arizona. However, Amazon may still make the same arguments again, catered toward the Ninth Circuit’s reasoning, to defeat a future case.
Ultimately, this issue should concern anyone who purchases products on Amazon.com—especially considering that Amazon increasingly relies on third-party vendors and doesn’t make it easy for customers to see that a particular product is sold by a third party. Between 2010 and 2020, the percentage of sales by third-party vendors increased from 34% to 62%.
Defective products sold by these third-party vendors remain a problem on the website. An investigation conducted by the Wall Street Journal in 2019 “found 4,152 items for sale on Amazon.com Inc.’s site that have been declared unsafe by federal agencies, are deceptively labeled or are banned by federal regulators—items that big-box retailers’ policies would bar from their shelves.” Although Amazon removed 57% of the listings after the Wall Street Journal notified the company, the remaining 43% stayed on the website.
In July 2021, the Consumer Product Safety Commission (the “CPSC”) filed an administrative complaint against Amazon.com to “force Amazon to accept responsibility for recalling potentially hazardous products” sold on the website. The CPSC alleged that hundreds of thousands of defective carbon monoxide detectors, hairdryers, and childrens’ pajamas were sold on Amazon between May 2019 and March 2021. The CPSC wants to make Amazon, as a distributor of defective and dangerous products, stop selling these items, recall them, and directly notify consumers of the recall while offering them a full refund. The CPSC’s position is that action taken by Amazon in the past is insufficient to meet its legal obligations and to protect consumers.
Courts have proven reluctant to hold Amazon liable for defective products sold on Amazon.com. Although recent cases, most notably in California, have gone against this trend, Arizona has not. This puts Arizona consumers at risk of having no remedy available to them for injuries caused by defective or dangerous products sold on Amazon.com.
One solution is to simply avoid purchasing products that are not sold by Amazon itself. Yet, as Amazon continues to increase the number of third-party sales on its website, that may not always work.
Beginning September 1, 2021, Amazon expanded its A-to-Z guarantee so that “in the unlikely event that a defective product sold through Amazon.com caused property damage or personal injury, Amazon will directly pay customers for claims under $1,000.” The company asserts that this threshold accounts for more than 80% of cases. The company also states that it “may step in to pay claims for higher amounts if the seller is unresponsive or rejects a claim [the company believes] to be valid.”
Given the company’s consistent disavowal of liability, however, it is unclear when, if ever, the company will believe a claim to be “valid.” Ultimately, Amazon voluntarily taking responsibility is not the same as having legal liability. The only true solution to protect consumers is for state courts to consistently hold Amazon liable for products sold by third parties, or for state legislatures to enact laws that will do so.