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Amazon liability ruling could set new precedent across business model

Published on: July 9th, 2019

The online retailer continues to come under fire for allowing unsafe products, including toys, to be sold by third-party marketplace sellers. 

A federal court ruling that Amazon.com Inc. can be held liable for a dog collar sold on its website that partly blinded a woman could complicate the online merchant’s business if it is applied broadly. As reported by Bloomberg, The Third Circuit Court of Appeals, in Philadelphia, overturned a judge’s decision that Amazon was shielded under the Communications Decency Act, which protects online businesses from lawsuits over the postings of their users.

The lawsuit was brought by a woman, Heather Oberdorf, who had bought a dog collar with a retractable leash sold by the Furry Gang through Amazon. When she took her dog for a walk, the pet lunged, breaking a ring on the collar, she claimed. That caused the leash to recoil and hit her face and eyeglasses, permanently blinding her in the left eye, she alleged.

The Third Circuit Court of Appeals is the first federal appeals court to hold that Amazon is a product ‘seller’ that can be held liable under state law for sales on its marketplace. That is so, the court said in a divided ruling on Wednesday, “even though the products are sourced and shipped by third-party vendors.” It found that “Amazon’s involvement in transactions extends beyond a mere editorial function; it plays a large role in the actual sales process.”

If the ruling is applied more broadly, it could significantly affect Amazon. More than half the items sold on the site come from independent merchants. Amazon takes a commission on sales and charges additional fees for storing products in its warehouses, packaging them and delivering them – but it technically doesn’t own the inventory, a fact it has used to protect itself from product liability cases.

Amazon has previously been found to be allowing the sale of unsafe toys and kids products on its Amazon Marketplace platform. In July 2018, research carried out by the consumer watchdog Which? revealed that it was selling slime that exceeds the limits for boron specified in the EU safety standard. And in January, a boy in America was hospitalised after swallowing magnets from an Imden brand toy bought from Amazon.

The retailer has also been highlighted by the BTHA, which recently launched its Don’t Toy with Children’s Safety campaign, after a study conducted across three major online platforms found that 58% of toys selected for assessment were non-compliant with toy safety regulations in the UK, and 22% of the total demonstrated serious safety issues.

How broad the impact of Wednesday’s ruling will be remains to be seen. Three other federal appeals courts have ruled recently in product cases brought against Amazon. Two ruled in the company’s favour on the ‘seller’ issue. The third didn’t address the issue directly.

Representatives of Amazon didn’t immediately respond to a request for comment on the ruling.

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