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Amazon Can Be Held Liable for Faulty Third-Party Products

Court Rules Amazon Can Be Liable for Faulty Third-Party Products 

Amazon.com made $232.9 billion in revenue in 2018, making it the largest online retailer in the world.

It also accounted for nearly 50% of the total e-commerce market in the US. Amazon sells more than 12 million products, and more than half of the sales come from third-party vendors. These vendors use the online platform as a marketplace to sell their merchandise.

With such a large magnitude of products entering the consumer market under the watch of Amazon, the issue of product liability becomes crucial. What happens if a product sold by a third-party vendor turns out to be faulty? Who will be held liable in such a case – Amazon or the independent vendor?

In the case of Oberdorf v. Amazon.com Inc., the 3rd Circuit Court of Appeals recently tackled these questions. It also overturned a previous ruling by the District Court that stated Amazon cannot be sued for product liability since the company isn’t technically the “seller” but only a facilitator.

The 3rd Circuit Court concluded that Amazon is definitely a seller under the legal standards of Pennsylvania, and thus, it is legally responsible for all the products sold by third-party sellers.

This decision can have significant legal implications for Amazon in the future.

The Lawsuit against Amazon

In January 2015, Heather Oberdorf bought a retractable leash for her dog from a third-party vendor, the Furry Gang, via Amazon. She was walking her dog when the dog suddenly lunged, breaking the collar, which hit Oberdorf in the face.

She was wearing glasses at the time, and due to this mishap, the broken pieces of glasses entered her eyes, leaving her permanently blind in her left eye.

The dog leash was shipped from the facilities of The Furry Gang, but when Oberdorf tried to contact the seller after her accident, she found no way to reach the seller. It turns out the seller had deactivated the account.

That’s when Oberdorf filed a civil lawsuit against Amazon in the US District Court in Pennsylvania. She alleged that Amazon failed to provide proper warnings with the product and also failed to adhere to a strict design inspection.

Oberdorf also claimed that Amazon was negligent in the inspection, testing, marketing, distribution, and selling of the product, and it allowed a faulty product to enter the consumer market without an appropriate hazard analysis.

The district court went on to dismiss the lawsuit, saying that Amazon simply cannot be held accountable under the liability law of Pennsylvania because it’s not a “seller” (according to the definition in the statute).

Appeal to the Circuit Court

When Oberdorf went to the 3rd Circuit, it analyzed the definition of “seller” more closely under the interpretation of the Supreme Court.

The 3rd Circuit reflected on four factors:

  • Whether the strict liability clause of the company serves as a safety incentive
  • Whether the company is the only member in the marketing chain available to the injured plaintiff for grievance redressal
  • Whether the company can circulate the cost of compensating for injuries that were caused by the defective products by charging for it
  • Whether the company is in a better position (than customer) to prevent the distribution of unreliable/malfunctioning products

The 3rd Circuit then found that Amazon has significant control over its third-party sellers by reserving the right to take down product listings, terminate marketplace services, impose transaction limits, and withhold payments.

This indicates that Amazon is entirely able to remove hazardous products from its portal.

The court also found that Amazon is the only member in the marketing hierarchy that is available for reimbursement since the third-party vendors are only allowed to communicate with the consumers through Amazon.

This enables these vendors to maintain anonymity from the customers. The 3rd Circuit also found that Amazon is not using any vetting process to make sure those independent vendors are responsive to the legal process.

As for the third point, the court noted that Amazon is capable of adjusting its commission fees based on any risk presented by the vendors.

It was also concluded that Amazon is in a much better position than the customer (Oberdorf) to prevent the distribution of flawed merchandise because the potential for continuing sales boosts the ongoing relationship between the third-party vendors and Amazon.

In light of all these factors, the 3rd Circuit reached the verdict that Amazon is indeed a seller and thus, can be held legally accountable for injuries and damage resulting from faulty products sold by independent vendors.

Important Legal Implications of the Case

In product liability cases like these, a defendant (seller) is held responsible for any malfunction that can bring harm to the customer. It should be noted that a “negligence” theory is different from a “product liability” case.

In a product liability case, the seller may not have necessarily committed any wrongdoing or intentional harm. In these cases, the plaintiff only needs to prove that the seller sold a product that was hazardous to an unreasonable degree.

The Oberdorf v. Amazon case has firmly established that Amazon is a seller and can be held liable for any defective product sold by its third-party vendor.

All cases of strict product liability can benefit from the testimonies of product designers, safety experts, and engineers regarding the possible dangers of the product. The fact that the 3rd Circuit rejected Amazon’s arguments that it’s not strictly a “seller,” proves that any future defenses to strict products liability claims will depend on a case-to-case scenario.

This ruling may also have long-term implications across other districts that are tackling strict product liability claims against Amazon and other e-commerce portals. This will also have a huge impact on consumers as well as third-party vendors going forward.

Watch YouTube Video: Federal Appeals Court Says Amazon is Liable for Items Sold by Third Parties. The news clip below explains how the court’s ruling could lead to many lawsuits against Amazon involving faulty, third-party products.

Sacramento Product Liability Attorney

I’m Ed Smith, a Sacramento product liability Lawyer. In my experience spanning over 37 years, I have successfully represented numerous victims of defective products and helped them collect millions of dollars in damages. If you or your loved one has suffered injuries or property damage due to a faulty product or equipment, call me for free, friendly advice at (916) 921-6400 or (800) 404-5400.

I am a member of the National Association of Distinguished Counsel and the Million Dollar Advocates Forum.

See our firm’s case history at our  Settlements and Verdicts page.

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