The question of whether Amazon can be held liable for faulty products that are sold on its Marketplace by third-parties is one that the e-commerce giant has wanted to settle for a long time. It got a little closer to an answer on Thursday when a California state appeals court ruled that, at least in the Golden State, Amazon has a lot to worry about.
Amazon user Angela Bolger claimed in a lawsuit that a replacement laptop battery purchased from an Amazon third-party seller, Lenoge Technology HK Ltd, exploded, causing her to endure “severe burns” on her arms, legs, and feet. Bolger wanted Amazon to be held directly accountable for distributing the defective product, but a San Diego Superior Court ruled in favor of Amazon, finding that it acted as a service provider in the chain of sales and wasn’t responsible under the state’s product liability law.
But a California appeals court said on Thursday that Amazon should indeed “be held liable if a product sold through its website turns out to be defective.” In the opinion written by Justice Patricia Guerrero, the court ruled that the online retailer took on a direct role in every part of the sale and acted as much more than just a service provider connecting customer and distributor. Guerrero writes:
As a factual and legal matter, Amazon placed itself between Lenogeand Bolger in the chain of distribution of the product at issue here. Amazon accepted possession of the product from Lenoge, stored it in an Amazon warehouse, attracted Bolger to the Amazon website, provided her with a product listing for Lenoge’s product, received her payment for the product, and shipped the product in Amazon packaging to her. Amazon set the terms of its relationship with Lenoge, controlled the conditions of Lenoge’s offer for sale on Amazon, limited Lenoge’s access to Amazon’s customer information, forced Lenoge to communicate with customers through Amazon, and demanded indemnification as well as substantial fees on each purchase. 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.
In a statement to Congress in July, Amazon founder Jeff Bezos said that third-party sales on the Amazon marketplace account for about “60% of physical product sales on Amazon, and those sales are growing faster than Amazon’s own retail sales.” The company has argued for years that it acts as a facilitator in these transactions and that it does its best to police the platform. That argument has worked before, but different states have different liability laws. But as of now, it doesn’t fly in Cali.
These days, we mostly hear about Section 230 of the Communications Decency Act in relation to debates over speech on social media platforms. The federal law provides liability protection to websites for content that’s created by users. The 26 words in Section 230 have caused countless arguments and the question of whether they apply to third-party sellers in online marketplaces occasionally raises its head. In the Bolger case, the California appeals court rejected that argument, writing:
Amazon is not shielded from liability by title 47 United States Code section 230. That section, enacted as part of the Communications Decency Act of 1996 (CDA; Pub.L. No. 104-104, tit. V (Feb. 8, 1996) 110 Stat. 56), generally prevents internet service providers from being held liable as a speaker or publisher of third-party content. It does not apply here because Bolger’s strict liability claims depend on Amazon’s own activities, not its status as a speaker or publisher of content provided by Lenoge for its product listing.
Amazon declined to comment when contacted by Gizmodo about the decision, and it’s unclear what kind of precautions it will need to take going forward. As CNBC points out, the company is involved in similar litigation in other states including Minnesota and Pennsylvania.
The good news for Amazon is that its already obscene profits have exploded since the world entered a life-shattering pandemic. Its war chest is plenty ready for any adjustments that will be necessary in the future to cover its own ass.