online shopping

A United States safety regulator’s decision last week to sue Amazon.com could bring clarity to a question that has long befuddled courts and state legislatures in the country: who is responsible when a product bought from the world’s largest online retailer hurts or kills someone?

In recent years, dozens of people who say they were harmed by products, such as exploding hoverboards, defective batteries or faulty dog collars, have sued Amazon for compensation.

The company argues it is not liable, pointing instead to the third-party sellers that technically sold the items and are sometimes based overseas beyond the reach of US jurisprudence. Several courts have agreed with Amazon, citing product liability laws that never contemplated online shopping or digital middlemen.

But last week, the US Consumer Product Safety Commission (CPSC) sued Amazon, seeking to compel the company to participate in formal recalls of dozens of defective products sold by merchants on its sprawling marketplace.

The regulator is also seeking what would be a precedent-setting ruling that Amazon is a distributor of consumer products under federal law, a designation that would subject the company to future mandatory recalls on behalf of its sellers. Declaring Amazon a distributor would upend a commonplace tech industry defence deployed by companies from Facebook to Google, which claim they are not responsible for what is said, posted or sold on their platforms.

online shopping

An Amazon.com delivery driver carries boxes into a van outside a distribution facility in Hawthorne, California, on February 2, 2021. Photo: Agence France-Presse

“If CPSC wins on this, it’s going to be a huge deal for Amazon,” said Boaz Green, a former agency employee who now works for Neal Cohen Law, advising companies that sell their products on Amazon. Product safety advocates and some in the US Congress have been calling for action to tame “what’s perceived as this Wild West, unregulated market, with all these small sellers they can’t get at. But they can get at Amazon, or they can try”.

A determination that Amazon is responsible for its third-party sellers would hold the company legally liable for instances where it failed to warn consumers of defective products or banned products resurfaced for sale again, potentially forcing the company to spend more time and money overseeing its web store. It would also likely increase Amazon’s insurance costs.

The battle involves an oft misunderstood feature of Amazon’s retail empire: most items sold on its platform are not owned by the Seattle-based company. Technically, these are sold by third-party sellers, a category that encompasses established brands, family-run crafts makers, and hundreds of thousands of Chinese manufacturers and distributors.

Amazon charges a commission and other fees to list on the site. Increasingly, it also takes care of shipping and handling, under a programme called Fulfilment by Amazon that charges sellers to store items in the company’s warehouses and send them on to customers after they click “Buy Now”.

That model helped fuel Amazon’s rise, stocking its shelves with an almost endless supply of goods. But the online marketplace, which lets sellers sign up and manage their listings with largely self-service tools, has become increasingly difficult to control and patrol. When consumers are harmed by unsafe or counterfeit products, they have little choice but to try suing a company that has won more often than it has lost.

Since product liability rules are set at the state level, the case of a California woman who sued and won after being burned in a fire allegedly sparked by a hoverboard she bought on Amazon had little bearing on the company’s success earlier this year, fending off a lawsuit from the parents of a toddler injured in Texas after swallowing a remote-control battery.

Product liability cases have usually been decided on narrow issues such as whether Amazon took ownership of the items, or if it played a role in creating a market for a certain product. The company typically asserts that it is a neutral marketplace, connecting buyers and sellers, or that it is protected from liability because other companies wrote item descriptions and arranged for product delivery. It has also sought to use as a shield Section 230 of the Communications Decency Act, a legal provision that grants web platforms immunity for content created by others.

Now federal authorities are sidestepping that defence and targeting Amazon’s vast logistics operation.

In the lawsuit filed last week, the CPSC said products stored and shipped by Amazon meet the distributor definition as laid out in the Consumer Product Safety Act, giving the agency the power to compel Amazon to cooperate with recalls of third-party products and levy penalties when it fails to do so. The CPSC is trying to get Amazon to participate in formal recalls of hundreds of thousands of hair dryers, carbon monoxide alarms and children’s pyjamas, sold by third parties but stored and shipped by the company.

At the Prosper Show, a conference for Amazon merchants held last week in Las Vegas, dozens of attendees sat in on a session about product safety rules, a topic that took on more importance in light of the CPSC lawsuit. Rachel Greer, a former Amazon employee who now advises merchants, said the company began contacting clients who sell children’s sleepwear about eight months ago, hinting that regulators were sniffing around.

Amazon has been gradually getting more vigilant about product safety over the past several years, Greer said. A new product safety team started work by 2016, and Amazon began requiring better product labelling on potentially hazardous products.

Last year, the company started requesting compliance documents from those selling certain products to show they were meeting standards.

Greer indicated that Amazon is fighting responsibility for recalls to avoid “this giant can of worms”.

“There are so many items being imported that aren’t meeting requirements in the US,” she said. “So if they do this recall, CPSC could say, ‘Great, now do the rest’.”

online shopping

Most items on Amazon.com are sold by third-party sellers, a category that encompasses established brands, family-run crafts makers, and hundreds of thousands of Chinese manufacturers and distributors. Photo: Shutterstock

In emailed statements, Amazon said that, by contacting customers about defective products and issuing refunds, it had already done what CPSC aims to achieve with a formal recall.

“Amazon has always believed that we have an obligation to our customers to provide the safest shopping experience,” said company spokeswoman Mary Kate McCarthy. “This is why Amazon has messaged customers and covered the cost of refunds when selling partners failed to engage with regulators about recalls.”

The company has also touted its work to make sure products on its marketplace are safe, including software that scans products for hazards, and requirements that sellers of some categories of goods upload product testing or other certificates.

Before the lawsuit, Amazon had proposed working with the CPSC to set up a voluntary system in which Amazon and other online marketplaces would coordinate recalls on behalf of their sellers. Talks broke down, a spokesman for the agency said, when it was clear Amazon would refuse to go through formal, legally mandated recall processes.

In a statement, acting CPSC Chairman Robert Adler lamented that before it can carry out a recall of a product sold on a marketplace, the agency typically has to go through “a lengthy negotiation” with companies like Amazon to establish whether they are even subject to regulation. “Clearly the current approach is not sustainable,” he wrote.

“This is a shot over the bow for online platforms in general,” Creighton Magid, a product liability and regulatory lawyer with the firm Dorsey & Whitney, said of the lawsuit. It is also a gamble for the roughly 500-person CPSC, which coordinates hundreds of product recalls but rarely seeks to take uncooperative manufacturers or retailers to court.

Magid, who represents businesses that must comply with product regulations, said the CPSC is an underresourced agency that has to be very selective in what it does. Here, it is “taking on an 800-pound gorilla”, he said.

The case could take years to resolve. It will first be heard by an administrative law judge; then parties can appeal to the full board of CPSC commissioners. From there, the loser could seek another hearing in federal district court.

In the meantime, state legislatures could act. California has considered a bill that would apply to online marketplaces the same liability standards as physical retailers, but it stalled as appeals courts found Amazon responsible for marketplace products under existing law.

Amazon offered support for that bill if it would encompass all online marketplaces, spreading around the costs of compliance that Amazon is well positioned to bear. Amazon’s smaller rivals, and a trade group representing eBay, Etsy and Shopify, opposed the measure.

“Somebody needs to pay for the harm,” said Daniel Hinkle, a senior state affairs counsel with the American Association for Justice, a trade group for trial lawyers. “Because if they don’t pay for the harm, it’s the consumer that does,” Hinkle said. “They’re the ones who are out a home, a car or a child, or are relegated to a wheelchair for the rest of their lives.”


Japan travel news, japan travel guides, japan holiday destinations and japan reviews

LATEST NEWS

NEWS RELATED

China stocks: New Oriental, TAL Education scrap earning releases, media calls amid regulatory storm

New Oriental Education and TAL Education, two of China’s largest tutoring services providers, have cancelled their upcoming earnings releases and media calls amid Beijing’s intensified crackdown on off-campus tutoring. The companies separately announced the cancellations on Friday, citing “recent regulatory developments” as the reason, without further elaborating. New Oriental Education…

Read more: China stocks: New Oriental, TAL Education scrap earning releases, media calls amid regulatory storm

From Peregrine to Next Digital: Hong Kong invokes rarely-used powers in company law

Hong Kong’s government this week appointed Clement Chan Kam-wing of accounting firm BDO as a special inspector to look into the financial affairs of Next Digital, the publisher of the now-defunct Apple Daily newspaper. It marks the first time in 22 years the government has invoked a clause in the…

Read more: From Peregrine to Next Digital: Hong Kong invokes rarely-used powers in company law

China’s Big Tech crackdown: Will Beijing’s efforts kill the country’s most vibrant economic sector?

Beijing’s campaign to rein in the power and influence of Big Tech in the country is reaching new heights, pummeling tech stocks and leading many analysts to question if the tougher scrutiny could end up emasculating the most vibrant sector of China’s economy. China’s full complement of regulators have let…

Read more: China’s Big Tech crackdown: Will Beijing’s efforts kill the country’s most vibrant economic sector?

Opinion: The Who, What and Why of China’s Regulatory Campaign

China’s regulatory crackdown has sent shockwaves through global stock markets. Photo: VCG Stocks of offshore-listed Chinese companies have slumped recently amid Beijing’s sweeping regulatory actions targeting a range of industries from fintech and ride-hailing to after-school education. Overseas investors are withdrawing capital across numerous sectors in a panic as they…

Read more: Opinion: The Who, What and Why of China’s Regulatory Campaign

China hatches a plan to lead in the adoption of new internet protocol as Beijing eyes internet of things

China wants to achieve global leadership in the next-generation IPv6 internet protocol by 2025 as Beijing prepares itself for the internet of things (IoT) era, when a washing machine or a microwave oven may have their own IP address. According to a document released by the Cybersecurity Administration of China,…

Read more: China hatches a plan to lead in the adoption of new internet protocol as Beijing eyes internet of things

Amazon fined US$880 million by Luxembourg authorities over data privacy breach

Amazon was fined €746 million (US$880 million) by Luxembourg authorities over allegations it flouted the EU’s data protection rules, the online retail giant said on Friday. The fine was issued on July 16 by the Luxembourg National Commission for Data Protection following its determination that “Amazon’s processing of personal data…

Read more: Amazon fined US$880 million by Luxembourg authorities over data privacy breach

China Orders 25 Tech Giants to Fix Raft of Problems

(Bloomberg) — China ordered 25 technology companies to carry out internal inspections as part of a campaign to root out illegal online activity. The Ministry of Industry Information Technology told its largest internet and hardware companies including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. Friday to carry out internal…

Read more: China Orders 25 Tech Giants to Fix Raft of Problems

SEC Requires Additional Disclosures for Chinese IPOs

U.S. Securities and Exchange Commission Chairman Gary Gensler The U.S. Securities and Exchange Commission will require additional disclosures from Chinese companies seeking to sell stock in the U.S. as the Chinese government’s crackdown on foreign listings and enhanced cybersecurity reviews are “relevant to U.S. investors.” SEC Chairman Gary Gensler asked…

Read more: SEC Requires Additional Disclosures for Chinese IPOs

Joe Biden, US lawmakers working on parallel tracks to bolster China tech policy

US regulators step up scrutiny of IPO hopefuls from China

China's Politburo confirms clampdown on overseas tech listings

China's Xiaomi overtakes Apple as No. 2 smartphone vendor

US sets new disclosure rules for Chinese IPOs coming to American stock markets

China’s transport ministry puts more pressure on Didi with strong words on regulation and compliance

Beijing summons Alibaba, Tencent, ByteDance, 9 other tech firms over data security concerns

Hong Kong bank deposits rose 11.5 per cent in the first half as investors chased highly anticipated IPOs

OTHER NEWS