Amazon Marketplace and Third-Party Sellers: The Battle over Strict Product Liability.

AuthorGillies, Zoe

"Amazon is fully capable, in its sole discretion, of removing unsafe products from its website. Imposing strict liability upon Amazon would be an incentive to do so." (1


    Strict product liability is the legal theory that holds distributors, manufacturers, or sellers liable for any injury to a customer resulting from a defective product, regardless of whether the consumer is at fault. (2) Since its inception in 1944, state legislatures across the United States have overwhelmingly adopted this tort. (3) Following the rapid growth of e-commerce throughout the last decade, product liability now applies to more than just brick-and-mortar retailers. (4)

    Online businesses face a variety of product liability issues because consumers are able to purchase items with the click of a button. (5) Additionally, allowing internet retail companies to avoid strict product liability for products sold by third-party sellers poses a unique risk to e-commerce consumers. (6) As the largest online retailer in the United States, Amazon is no stranger to these issues. (7)

    Over the past twenty years, Amazon has grown to dominate e-commerce in the United States. (8) Many consumers, however, may not be aware of the difference between Amazon Retail and Amazon Marketplace. (9) Amazon Marketplace is Amazon's platform that allows third parties to sell their goods to consumers without selling the brand to Amazon. (10) With sales of $175 billion in 2018, Amazon Marketplace makes up about two-thirds of Amazon's total profit and is considered the largest online retailer in the country. (11) EBay trails in second place behind Amazon Marketplace for third-party platforms and is five times smaller in sales. (12) Consumers and other retailers often overlook Amazon's domination of third-party sales, as they are not always aware of the difference between Amazon Marketplace and Amazon Retail. (13)

    Amazon recently faced a plethora of lawsuits regarding Amazon Marketplace and strict product liability. (14) When consumers buy a product from a third party on Amazon Marketplace and are subsequently harmed, they may file a strict product liability suit against Amazon. (15) In these cases, Amazon has argued that it is not the technical "seller" of products on Amazon Marketplace for strict liability purposes and instead asked customers to seek recourse from the third party. (16) Contacting third-party sellers has been difficult in situations where the injured consumer cannot locate the third-party seller or the seller no longer exists. (17) Several circuit courts recently decided this liability issue, resulting in conflicting decisions regarding whether courts should consider Amazon to be the "seller" of third-party products. (18)

    This Note examines the risks and potential ramifications of not holding Amazon liable for defects in third-party products sold through Amazon Marketplace. (19) Section II.A discusses the history and evolution of consumer protection jurisprudence in the United States. (20) Section II.B provides an overview of the recent decisions regarding Amazon Marketplace liability, specifically Oberdorf v. Inc., and the precedent these decisions set. (21) Section II.C evaluates other online marketplaces and compares their product liability exposure to Amazon's. (22) Section II.D assesses Amazon's defense, the Communications Decency Act (CDA), and in particular, section 230 (CDA 230) and its application to third-party products. (23) Part IV argues that Amazon should be considered the "seller" of third-party products on Amazon Marketplace to protect consumers and incentivize safe practices. (24)


    1. Consumer Protection: Strict Liability

      1. Evolution of Strict Product Liability in the United States

        Strict product liability in the United States began to develop in the early 1900s. (25) Before this theory existed, courts required direct privity between consumers and the manufacturer to recover for any injury caused by a defective product. (26) As the United States industrialized and the production of goods evolved, so did tort law surrounding new products for sale, and courts became increasingly concerned about public safety. (27) In 1944, Justice Roger Traynor established the concept of strict liability in his concurring opinion to a California Supreme Court case. (28) Justice Traynor continued to advocate for strict product liability in later cases, grounding his conclusions in public policy, social responsibility, and safety concerns for consumers. (29) Greenman v. Yuba Power Products, Inc. (30) was another formative case for the strict product liability doctrine, as the Supreme Court of California adopted Justice Traynor's theory of strict product liability and held the manufacturer strictly liable. (31) The Restatement (Second) of Torts (Restatement) closely tracks Justice Traynor's strict liability concept in its own strict product liability doctrine, which exposes any party in the chain of production to potential liability. (32)

      2. Adoption of Strict Product Liability

        According to the Restatement, those involved in selling or distributing products are subject to liability for any harm caused to the consumer. (33) While there is no federal statute for strict product liability, every state has adopted some version of product-seller negligence laws for conduct occurring in the distribution chain. (34) Although many states have embraced some version of the Restatement, its release did not come without criticism. (35) Opposing scholars have argued that strict liability "place[s] burdensome costs on manufacturers, prevent[s] vital research and development; it deter[s] businesses from marketing worthwhile products ; and courts should defer to the legislature and regulatory agencies instead. " (36) Nevertheless, most states across the country have adopted the doctrine. (37) Consequently, any party selling goods to consumers in a state that has adopted the Restatement view is subject to potential liability for any injury to the consumer resulting from defective goods. (38)

    2. Amazon as a Seller: The Legal Landscape

      Since its founding in the mid-1990s, Amazon has grown to dominate the online retail market and has capitalized on the increasing popularity of online shopping. (39) Amazon Marketplace--the focus of the recent debate regarding strict product liability and e-commerce--allows third parties to sell products by choosing between three different methods of product fulfillment: Fulfillment by Amazon (FBA), Fulfillment by Merchant (FBM), and Seller Fulfilled Prime (SFP). (40) Each of these methods outline varying degrees of responsibility between Amazon and the third-party seller. (41) Consistent throughout all methods, however, is that Amazon exercises control over product pricing, collection of payment, and communications with customers. (42) Recently, several circuit courts decided cases involving Amazon Marketplace products and strict product liability with varying results. (43) In each of these cases, a consumer purchased a product from Amazon Marketplace and faced significant injury due to a defect in the product. (44) While both the Fourth and Sixth Circuits, as well as the Federal Circuit, found in favor of Amazon and held that the company was not strictly liable as a seller of third-party products, the Third Circuit took a different perspective in Oberdorf and held that Amazon should face liability for a defective third-party product. (45) Nevertheless, a majority of the active judges on the Third Circuit later voted to rehear the case en banc. (46) These recent cases represent the uncertainty surrounding Amazon Marketplace's product liability and whether it is subject to strict product liability, as well as how variations in state product liability laws can affect a consumer's legal recourse in these transactions. (47)

    3. Other Third-Party Online Retailers and Product Liability Exposure

      The essential question in product liability suits involving Amazon and third-party sellers is whether Amazon is "merely an online marketplace," playing a role akin to that of an auctioneer by simply facilitating a transaction between buyer and seller, or whether Amazon's involvement in the selling process rises to the level of a "seller," subjecting the company to liability. (48) To answer this question, it is helpful to compare Amazon's model to other third-party online retailers. (49) EBay, for instance, is an online retailer with a focus on consumer-to-consumer sales and online auctions. (50) EBay differs from the Amazon Marketplace platform in that it asks customers to place bids on items to purchase them, similar to an auctioneer. (51) EBay ranks second out of the largest online marketplaces by sales, although it trails significantly behind Amazon. (52) While eBay and Amazon both list third-party seller information on a product's webpage, the typeface is significantly smaller on Amazon's platform and "buried in an information-dense area of the user-interface." (53) Because of its auctioneer model, eBay customers are inevitably aware that they are bidding on an item sold by a third party, while Amazon customers may not notice the small print that indicates the product comes from another company because the webpage and listing looks almost identical to when Amazon itself sells a product. (54)

      Amazon Marketplace is also distinguishable from Craigslist--an online service that allows consumers to post classified ads in a manner similar to a newspaper. (55) While Craigslist simply seeks to connect the seller and buyer on a neutral platform, Amazon's interests in its consumer transactions run much deeper. (56) These interests include Amazon Marketplace's different fulfillment methods and the company's varied involvement in the shipping and handling process for third-party sales. (57)

      Further, several cases exist in which neither Amazon nor the injured customer are able to locate the third-party vendor or...

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