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Is Amazon Liable for a Defective Product?

Written by Berkowitz

defective products

These days, you can buy just about anything online – including a vehicle. When you purchase products online through a retailer, you expect that the product they sell to you is safe.

Unfortunately, the rapid growth of the online vendor industry has left a gap between the law and consumer protections. Online retailers today provide millions of products nationwide, but many of them use third-party vendors that can create issues of quality control and safety.

One company customers are familiar with is Amazon – one of the largest online retailers in the world. Amazon shipped more than 5 billion items through their Prime program in 2017 and even released their list of the most popular items, ranging from entertainment to grocery products to household care items.

When you buy something through a big retailer like Amazon, you expect some quality control. However, when injuries occur from products sold through Amazon, multiple legal issues can arise, making it hard to identify who would be at fault.

Understanding Product Liability Laws in Bridgeport and How They Affect Online Sellers

Amazon is no stranger to lawsuits. In fact, State Farm filed a lawsuit against the online retail giant after a defective vape battery was sold on the website. That battery ignited a fire that caused more than $400,000 in damage to a policyholder of a State Farm homeowner’s insurance plan.

The company alleges that Amazon was liable for the damage, and the case was filed by a law firm in Los Angeles, California. The suit named the maker of the battery, LG, along with Amazon.

Amazon’s attorneys fired back against the lawsuit, stating that they did not design, manufacture, or sell the batteries. Instead, the company cited their protections under the Communications Decency Act that explicitly protects online publishers from claims by other companies.

Three of the cases are currently before the federal appellate courts in the 3rd, 4th, and 6th Circuits, and these courts will decide if Amazon could be held liable for the damage of a product sold on their site.

In another case, Amazon was sued after a defective hoverboard ignited and caused a severe fire in 2016. Amazon was found not responsible for the damages, because an outside merchant used Amazon, and the outside merchant was the responsible party for selling the product. This case was in Pennsylvania, where the court decided that Amazon worked similarly to a classified ads section of the newspaper; therefore, Amazon could not be held liable under the strict products liability laws. The Pennsylvania case is also under appeal.

Selling on Amazon: The Use of the Third-Party Vendor

If you buy something on Amazon, you will see the vendor’s name. Sometimes, the vendor is a third party who is not Amazon. Amazon does work with third-party vendors. In fact, you could make crafts and technically sell them through Amazon’s website. Most of these vendors are big-name retailers, but there are still small stores and individual third-parties selling on the site.

Anyone designated as a “professional seller” on Amazon’s website must have a Commercial Liability Insurance Policy. The website states that the insurance must have a $1 million minimum per incident coverage for general liability, property damage, or bodily injury. Amazon does have a strict policy on this, which shows that they wish to avoid responsibility and push the vendor into the hot seat.

Today, Amazon has multiple subsidiaries also selling on their website, including Whole Foods. So, how would it work if someone has a defective product from Whole Foods and needs to sue for injuries they suffer?

While Amazon can escape liability in the third-party vendor rule, how does it fair with subsidiaries?

Examining the Subsidiary Relationship

Amazon is the parent company of Whole Foods and became such when they paid $13.7 billion to purchase the company. Amazon owns numerous subsidiaries, with some you might even recognize like:

  • Audible.com
  • CreateSpace
  • Twitch
  • Whole Foods
  • Junglee
  • Goodreads
  • Fabric.com
  • IMDb
  • Woot!

Using basic logic, you might assume that the parent company would be responsible for the actions or negligence of its subsidiary – just like a parent would be responsible for the actions of their child.

Unfortunately, the law does not apply this principle.

Under United States v. Bestfoods, a 1998 Supreme Court ruling, the ruling held that a corporate parent company is not responsible for the acts of its subsidiaries. Therefore, this ruling would mean Amazon might not even be responsible for defective products sold by subsidiaries.

While case law tends to drive future cases, it is not set in stone. There are exceptions to the 1998 ruling. And while Amazon has numerous instances of exemption, the corporate veil does not always protect them. If the subsidiary operates under the name of the parent company, the rules change.

Unfortunately, if a product from Whole Foods injured you, it is unlikely they would operate under the Amazon business name. After all, you would more likely purchase organic produce from Whole Foods than Amazon.

When the Subsidiary Has No Assets for Defense

An exception would be if the subsidiary lacks assets to defend themselves in a lawsuit or fraudulence occurred by the parent company. With a company like Amazon and a subsidiary such as Whole Foods, it is unlikely Whole Foods would not have adequate assets to cover a lawsuit. Therefore, Whole Foods would more likely carry the legal burden.

Is Amazon the “Seller” or a “Publisher”?

From past cases, Amazon has claimed themselves as a publisher and not a seller. After all, under strict liability laws, anyone in the distribution chain could be held legally responsible for a defective product. Therefore, if Amazon were to classify themselves as a seller, they could technically be liable.

For now, the courts have made it clear that they view Amazon and other online retailers as not sellers, but publishers. Amazon’s products are sold in the equivalency of purchasing something from the classified ads in a newspaper. If you were to buy something in the classifieds, you could not sue the newspaper for advertising that sale.

Amazon is a middleman of sorts and a creative one at that. They have been able to use the Communications Decency Act (which protects online publishers from liability of a third party) successfully in their defense.

The Future Could Change for Amazon

While, as of today, you might not be able to sue Amazon or another online retailer, the court decisions in California could change that. The Supreme Court has not yet ruled on Amazon’s liability, and the judges in the cases involving Amazon will need to determine if Amazon is a genuine publisher or a seller. So far, no one has successfully held Amazon responsible. But the federal appellate court might change all of these assumptions soon enough.

According to Reuters, the technical loophole that Amazon is currently exploiting could go away. The appeals filed state that Amazon is different from a third-party online publisher. After all, they are a storefront with back-end services, ship products directly to consumers, and advertise through their company’s website.

Amazon is the subject of numerous lawsuits each year, and it appears that the courts are slowly coming around to recognizing that they are a different type of retailer. After all, Amazon is no longer a publisher when they control content. If you look at the terms and conditions for sellers, Amazon has explicit control over market power. They pick and choose what sellers can be on the platform, what they can sell, and what requirements must be met. This level of control is much stronger than your average “classified” found in an online advertisement or newspaper. Therefore, exercising that much control could open the court up to the idea of holding Amazon, as well as the other seller, responsible for injuries.

Buyer Beware

The only way to protect yourself from defective products on Amazon and other online retail sites is to be cautious of what you are buying. When you use these sites that sell through third parties, you are accepting all of the risks. Furthermore, some of these companies may be impossible to locate – many are out of the country. Therefore, holding them responsible for injuries could prove problematic.

If you prefer to buy online, as many of us do for convenience, you should shop through the retailer’s online website instead. For example, if there is a table you like, find it through the manufacturer or a retailer’s site who is selling the product and not serving as a middle-man publisher. Any time you purchase from a third-party vendor like eBay or Amazon, you run the risk of being injured by a defective product and having few parties to hold accountable.

Technology and Law Always Leave Gaps

Unfortunately, technology moves at speeds much faster than the justice system, which means laws rarely catch up to it in time. Eventually, the courts do recognize the changes, and they do change laws based on new demands.

While Amazon might be in the clear in a case of product liability, there could be a day in the future where Amazon is liable for the defective items they sell.

Injured by a Defective Product? Consult an Attorney

Even if you cannot hold an online retailer responsible, there is a third party that manufactured, sold, and distributed that product to Amazon that is responsible for your injuries.

If you were injured by a defective product purchased online or in-store, you have rights. Manufacturers are required to ensure their products are safe from defects, and they must remove their products from the shelves if they suspect injuries could occur. When retailers fail to protect the public, product liability lawsuits allow victims to seek compensation against them.

In your case, you may receive compensation for medical costs, lost wages, and more.

To explore your options or to start the process, you need an attorney with experience going up against big manufacturers and retailers alike.

Contact Berkowitz Hanna today to schedule a no-obligation case evaluation. Call or contact us online to get started.