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Appeals Court: Amazon Can Be Liable for Third-Party Sellers’ Products

Amazon.com, the world’s largest e-commerce marketplace, recently received a major blow from a Federal Appeals Court: it can be held liable for defective products sold on its website by third-party vendors.

The decision, handed down on Wednesday, July 3, will protect consumers from products Amazon sells, particularly when they face legal dilemmas where there may have little, if any, recourse for recovering compensation after suffering injuries and losses caused by defective products.

Given Amazon’s sheer size, it’s also a decision that could have a far-reaching impact. For example, the online sales leader has:

  • A 49% share of the U.S. e-commerce market, and 5% of the entire country’s retail market;
  • Over 12 million products, and has more than 95 million Amazon Prime members.

Amazon Third-Party Vendor Liability

While Amazon’s technology, online platform, and ancillary services (i.e. Prime, shipping, and streaming) have been a large part of its success, much of its growth is driven by third-party retailers who sell their products on Amazon.com. These sellers may keep their products in Amazon warehouses and have orders fulfilled by Amazon, or may ship directly to consumers.

According to data reported by Statista, over 50% of all Amazon sales come from these third-party vendors. What’s more, revenue from third-party services earned Amazon roughly $12 billion in revenue for the first quarter of FY2019 alone.

As the numbers show, Amazon has a deep reliance on its third-party vendors. Because it does not create these products, however, there have been questions over whether it should be held liable for products from third-party retailers sold on its website – especially when those products cause harm or losses.

Until last week, a number of courts (including two federal appellate courts) which have taken on cases concerning this issue have ruled in favor of Amazon.

The Latest Ruling

The latest ruling over Amazon’s liability reversed a lower court decision and is the first to go against previous court decisions. It stems from a 2016 lawsuit filed by a woman who claimed a retractable dog leash purchased through Amazon from a third-party seller malfunctioned, struck her in the face, and rendered her blind in one eye.

The product in question was shipped directly by the third-party retailer, but neither the victim nor Amazon were able to reach representatives of the company, which has been inactive on Amazon since 2016.

Ultimately, the three-judge panel ruled 2-1 in favor of the plaintiff. The majority opinion, written by Circuit Judge Jane Richards Roth, stated that Amazon could be held liable for third-party vendor products because it’s model of business allows vendors to “conceal themselves from the customer,” and can expose customers to the risk of having no direct recourse when they suffer injuries caused by unsafe or defective products.

The case will now be sent back to a lower court to decide whether the dog leash in this particular case was defective.

Implications for Product Liability

The latest ruling comes with major implications for Amazon – chiefly that it could very well be held liable for damages (at least in part) arising from defective products – including consumers’ pain and suffering, medical expenses, and lost wages. While manufacturers are primarily liable for injuries and damages suffered by consumers, the ruling provides an additional path of recourse in cases where victims may face legal challenges, such as:

  • Unidentified, defunct, unresponsive third-party sellers;
  • Foreign vendors and jurisdictional issues;
  • Catastrophic injuries and extensive damages.

Customers who purchased products they believed to be safe may ultimately have more options when seeking justice and compensation for their losses, as well as greater opportunities for obtaining accountability when vendors or Amazon attempt to escape accountability.

Levinson Axelrod, P.A. represents clients harmed by a range of defective products – including defectively designed, manufactured, or marketed consumer products, medications and medical devices, foods, auto parts, and products which expose workers to harmful toxins. We will continue to closely follow this case and future court decisions which may have an impact on the rights of our clients and their families.

Our team is available to help victims throughout New Jersey better understand their rights and options after product-related injuries involving Amazon and other off- and online retailers. Call (732) 440-3089 or contact us online to speak with an attorney.

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