Report from AboutLawsuits
In Brief – The US Consumer Product Safety Commission (CPSC) has announced its final Decision and Order concluding its administrative litigation with Amazon and outlining the steps the company must take regarding some hazardous products sold on their marketplace. Amazon is now required to abide by recall requirements traditionally imposed on retailers in instances where recalled products are sold on its marketplace site by third-party sellers but are also handled by Amazon’s massive Fulfilment by Amazon (FBA) logistics network. The recall duties do not apply to third-party seller products sold on the Amazon marketplace but not held by FBA. However, in combination, Amazon is the “distributor” of the product, bringing retailer-like duties. The ruling applies to more than 400,000 defective items sold, including faulty carbon monoxide detectors, children’s pajamas, and hair dryers, that were sold on Amazon’s shopping site and handled by FBA. New Amazon duties include notifying purchasers and the public about the product hazards and providing refunds or replacements. The administrative action began in 2021, and Amazon has said that it will appeal the order in federal court.
Context – Amazon’s top ecommerce innovation was to reimagine the business of consumer product wholesaler. Businesses that traditionally supplied products to major retailers that were then housed and sold off the retailer’s store shelves, have become “third-party sellers” who pay Amazon to have their products housed and sold off Amazon’s FBA shelves. By 2019, their sales were 60% of the total on Amazon. Those sales are often more profitable to Amazon than traditional first-party sales because total “seller” fees often exceed 50%. And Amazon fully controls the customer experience. When its Marketplace and FBA are legally considered unrelated businesses, similar to when a product is sold on Etsy and shipped by the US Postal Service, there are big liability benefits for Amazon. But in practice, the Amazon Marketplace and FBA function as one retail enterprise. The FDA and several product liability lawsuits are also slowly pushing the ecommerce giant on this point.