Amazon can be held liable for third-party sales, court rules

Amazon’s gargantuan online shopping enterprise received an unwelcome jolt this week when a federal appeals court ruled that the company can be held liable for items sold by third-party sellers on its platform.

Wednesday’s ruling by the 3rd U.S. Circuit Court of Appeals in Philadelphia reversed a lower court decision, and has the potential to expose Amazon to numerous lawsuits related to defective or counterfeit products sold by third-party sellers on its site, Reuters reported. Up to now, such lawsuits have been batted away by Amazon, but this may no longer be the case going forward.

Around 50% of all the products sold by Amazon come from third-party sellers, according to data from market research firm Statista. There are around 2.5 million active sellers on the site, helping the online shopping company to rake in around $11 billion from services provided to these vendors in just a single three-month period this year.

The Philadelphia case was brought by Pennsylvania resident Heather Oberdorf, who sued Amazon in a federal court in the state in 2016. Oberdorf claimed she was blinded in one eye when a retractable dog leash broke off, recoiled, and hit her in the face. She had bought the leash from a third-party seller on Amazon’s website. Despite repeated efforts, neither Oberdorf nor Amazon have been able to make contact with the seller of the leash, which removed itself from the online shopping platform several years ago.

In this week’s ruling, Circuit Judge Jane Richards Roth said the Seattle-based ecommerce giant could be liable in part because the way that it operates “enables third-party vendors to conceal themselves from the customer, leaving customers injured by defective products with no direct recourse to the third-party vendor.”

Commenting on the outcome of the appeal, David Wilk, Oberdorf’s legal representative, told Reuters: “It’s gratifying that the 3rd Circuit agreed with our argument and recognized that the existing interpretation of product liability law in Pennsylvania was not addressing the reality, the dominance that Amazon has in the marketplace.”

Up until now, Amazon has been able to persuade judges to rule in its favor when it comes to liability cases. CNBC reported on such a case in 2018 when a battery inside a hoverboard suddenly caught fire, causing a family home to burn down. The board was bought on Amazon’s site, with the plaintiff claiming that the online shopping company was at fault as it failed to adequately warn her of the potential dangers linked to the product — dangers that she said Amazon knew about. In such cases, the company maintains that it simply offers a platform for vendors and is not the actual seller of their goods, thereby absolving it of any responsibility.

But Wednesday’s ruling could see Amazon fighting more liability cases linked to defective or fake goods sold by third-party sellers on its site.
In Oberdorf’s case, the lower court now has to assess whether the leash that she bought from Amazon’s site was indeed faulty.

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