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The Law of the Jungle: How Long Can Amazon Evade Liability?

The Online Retailer Claims It’s Not Responsible for Defective Products Sold Through Its Platform

Finding the perfect gift has never been easier, thanks to online merchants like Amazon. However, finding recourse after a defective product causes serious damage could be more difficult. Recent product liability cases against the site have shown that our laws may need updates to reflect the reality of our online shopping experience.

How a Hoverboard Burned Down a House

In 2016, the Fox family in Tennessee was devastated when a battery fire erupted in their living room. The culprit: a hoverboard they gave their son for Christmas. The product was purchased through Amazon and was not the only one sold by the site that caught fire and endangered recipients. Amazon was not the direct seller of any hoverboards, which were manufactured and listed on its marketplace by Chinese companies, but many buyers didn’t realize they were third-party goods. 17 parties filed lawsuits against Amazon, hoping to recover for injuries and/or property damage caused by the unsafe products.

Amazon of course fought the accusations and, in many cases, won. Their defense? The company’s lawyers claim hosting a marketplace doesn’t make them a seller; they are simply a platform for sellers. Third parties who list items on Amazon must ensure they work safely. Circuit courts have split on whether this argument holds water.

Understanding Product Liability

Product liability torts were instated to protect consumers against bad actors among manufacturers, distributors, and retailers. They allow people injured by defective or malfunctioning products to recover expenses from the parties responsible for putting those products in their homes and offices. Many products sold in America are designed and/or manufactured overseas; by allowing consumers to hold anyone in the supply chain liable, these laws ensure that someone in the U.S. will have to answer for unsafe merchandise.

Online Shopping Has Changed How Products Reach Consumers

One might expect these torts to come into play in cases like that of the hoverboard. However, sales made through Amazon work differently than those made in a traditional brick-and-mortar store like Target. Any item you purchase from Target has been, in turn, purchased by a manufacturer before being placed on Target’s shelves. Target takes ownership of a product in order to exchange it with you for money, i.e., to make a sale. Though Amazon does purchase and brand some items for distribution, more than half of the goods on display never actually pass through their books. They receive commissions on sales made by third parties who use their platform.

This arrangement, Amazon claims, precludes them from any product liability lawsuits. They never purchase, or “take title to,” any third-party goods. They simply provide a location for sellers to reach new audiences. Therefore, all responsibility for defective items lies with the company that used their site to make the sale.

“A Seller in All but Name”

Given the number of unsafe products listed on Amazon, it’s in the company’s best interests to delineate a clear boundary between their responsibilities and that of third-party sellers. Unfortunately for the Fox family, they were able to successfully claim this distance in front of the Fourth Circuit Court. The Sixth Circuit also found in favor of Amazon against another victim of a house fire, this one started by malfunctioning headlamp batteries. 

However, it’s not all bad for consumers. Even in rejecting these cases, the judges who heard them noted that Amazon could not claim blanket immunity from liability. The company has likely structured its business precisely to dodge product liability laws as they stand. As such, courts or legislators may lead the charge to adapt these rules to the 21st century.

An Integral Part of the Chain

The Third Circuit is so far the only court to recognize that Amazon plays a larger role in the chain of distribution than their argument of being “just a platform” suggests. A plaintiff sued Amazon after becoming permanently blind in one eye due to a malfunctioning dog leash. The product’s seller no longer had an account on Amazon, so even if the consumer wanted to hold them accountable, she wouldn’t have been able to. 

A panel of judges on the Third Circuit Court found that, regardless of the legal definition of “seller,” holding Amazon accountable would benefit the general public. After an appeal by Amazon, the court has agreed to re-hear the case en banc. Whether they uphold the earlier decision remains to be seen.

Another recent decision made by a Wisconsin court found a way to define Amazon as a seller under law. When a defective XMJ bathtub faucet adapter caused a home to flood, the homeowners’ insurers took Amazon to court. In this case, the court recognized that, without Amazon, these homeowners would not have had access to XMJ products. Its participation in the sales process was major enough that it could be held liable under Wisconsin law. Amazon settled with the insurer shortly after the decision.

When Amazon Creates Liability

Though the Fourth Circuit denied the Fox claim on the grounds that Amazon was not a seller, they did allow another claim by the family to continue. Amazon, they ruled, took ownership of consumers’ safety in the case of hoverboard malfunction.

After multiple complaints of hoverboard fires were taken to Amazon, the company decided to change its policy regarding the items. They began requiring sellers to receive UL certification (a mark of product safety) and sent out a warning e-mail to those who had already purchased them. However, they failed to inform customers of the scope of the dangers; one who received a notice believed the letter meant the product was safe for use. It did not mention the fires that had prompted the move.

By warning their customers of potential dangers, Amazon demonstrated a belief that it owed a duty to keep buyers safe. The Fox’ claim they breached that duty by omitting vital information from their warning.

This is good news for the family, but it might be bad for the rest of us. If warning customers about faulty products opens Amazon up to lawsuits, the company might next time decide that it’s better to keep reports of injuries quiet. Once again, consumers get the short end of the stick.

Arguments Against Amazon Are Stacking Up

Cases involving Amazon have brought forth interesting arguments that suggest the company’s immunity may not last forever. The site’s methods of operation, meant to streamline their system, could actually be used against them. These arguments include:

  • With the “Fulfillment by Amazon” program, the company houses third-party goods in their warehouse and administers shipments. Many customers interpret this to mean the goods are endorsed or sold by Amazon.
  • Amazon controls the pricing of goods on its marketplace.
  • Its failure to keep detailed records from third-party sellers could leave customers without recourse.
  • It is the most likely party to receive reports of malfunctions and dangers, and therefore to cull harmful products from its marketplace.
  • Amazon prevents third-party sellers from interacting with customers.
  • Products are sold from the Amazon site, statements reflect bills from Amazon, and Amazon branding appears on receipts, order updates, and other communications.

These factors may reasonably lead consumers to believe Amazon is the seller of the goods. They also show the company’s involvement is far more than just a platform for sellers—they are a regulated marketplace. Their failure to enact policies to protect consumer safety is a choice, not a function of their business’ needs.

Amazon Can’t Get Away with Selling Dangerous Products Forever

Though more product liability decisions have favored Amazon than not, the winds may be changing. Product liability laws were written before the rise of the internet. Now, courts are realizing Amazon is taking advantage of the loopholes that have aged into laws.

If you or a loved one has been hurt by a product you purchased via Amazon, you deserve proper recourse. We refuse to back down from corporate legal intimidation and other unfair practices. Let us know if you think you have a case—and we’ll help you figure out where to go from there.

Reach out to Somera & Silver, LLP online or call us at (561) 981-8881 for your confidential consultation.