Amazon’s days of dodging liability for its marketplace could be numbered

Since 2017, most of the products sold on Amazon haven’t come from Amazon itself but from the independent vendors listing their goods on its third-party marketplace. It’s a critical piece of Amazon’s business, and it lets the retailer offer more items than it could ever stock on its own while feeding it cash from the fees it collects.

But it has also caused Amazon problems when products sold through it have turned out to be defective, fake, or had other issues. The company has always skirted legal liability by arguing it isn’t really the seller, but that may be starting to change.

Yesterday a California appeals court ruled Amazon is liable for products sold by third parties on its site. The case involved a lawsuit brought against Amazon by plaintiff Angela Bolger, who claimed a replacement laptop battery she bought from a third-party seller on the site was defective. The battery, she alleged, exploded and left her with severe burns. A trial court ruled that responsibility lay not with Amazon but the third-party seller, Lenoge Technology. The appeals court saw it differently. “Whatever term we use to describe Amazon’s role, be it ‘retailer,’ ‘distributor,’ or merely ‘facilitator,’ it was pivotal in bringing the product here to the consumer,” the ruling stated.

The case followed a similar outcome in Pennsylvania last year based on a 2016 lawsuit against the company, adding momentum to a shift in how the law treats Amazon in such instances. Prior to the Pennsylvania case, courts had treated Amazon more like an intermediary rather than the seller of products on its marketplace, according to Mark Geistfeld, a professor at New York University law school and expert on product liability. The distinction matters, he explained, because while a traditional retailer is responsible for what it sells, in most jurisdictions entities such as auction houses that enable a transaction between two other parties are not liable. Amazon, the court decided, was acting more like a retailer.

Another court did eventually vacate the Pennsylvania ruling, but Geistfeld said it had an effect. “This one is huge just because California is such a huge market and has an outsize influence on the development of tort law across the country as a result,” he said. Other states could potentially follow suit, effectively setting a national standard.

If the ruling stands, it opens Amazon to liability in other instances too, such as sales of counterfeit items on its marketplace. The issue has been a headache for Amazon, putting it at odds with prominent companies such as Birkenstock. In 2019 alone Amazon invested more than $500 million in efforts to fight fakes and this year created a team devoted to tracking down and punishing counterfeiters.

Amazon can still push back against the California decision, which could potentially go all the way to the state’s supreme court before it’s settled. “The court’s decision was wrongly decided and is contrary to well-established law in California and around the country that service providers are not liable for third party products they do not make or sell,” an Amazon spokesperson said in a statement. “We will appeal this decision.”

Still, as the law goes, the court’s decision yesterday is notable. “All of the early cases had found for Amazon,” Geistfeld said. “The tide has recently changed.”

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