How Amazon escapes liability for the riskiest products on its site - The Verge

Wendy Weintraub was always careful not to leave appliances plugged in, just in case. But around two years ago, she was getting ready for work by blow-drying her hair when she noticed smoke and the smell of burning. Soon, she saw something shoot out from the end of the hair dryer and onto the floor. It was a small metallic bit, she recalled, like a link in a necklace chain. Flying out of the dryer, it looked “like a shooting star.”

Weintraub says she purchased the hair dryer on Amazon in 2016, a high-end model that cost more than $200. She had never had any problems before that day.

She put the dryer down, but it was too late. Smoke was pouring out of her bedroom closet, and she was starting to panic. She dragged out her fire extinguisher and did her best to fight back the flames, but the smoke was everywhere and it was getting harder to breathe.

“That burns your throat and you feel it,” she says. “It’s terrible. It just burns.”

For a moment, she thought she’d successfully fought back the flames, but it quickly became clear that the fire would spread. The firefighters helped her out of her home as they fought the blaze, and she had to watch from outside, as the flames could be seen climbing out the windows of her home. “The whole house started,” Weintraub says. “The fire was just spreading.”

She managed to get her cats out with the firefighters’ help, for which she’s forever grateful. “Things are things and they can be replaced,” she says, “but life is life and cannot be replaced.”

The situation still feels surreal. “It’s hard to grasp when it happened, that it actually happened,” she says.

Weintraub still has lingering fears after the fire. For a time, she wouldn’t use a hair dryer unless someone else was home with her. When someone talks idiomatically about a “house on fire,” she gets upset. She returned to her fire-damaged home every day to take care of the stray cats that she had been feeding.

In some ways, what happened next was the best-case scenario for Weintraub. While she had to leave her house, the insurance company paid for the reconstruction costs and for a rental house while contractors handled the repairs. She’s since been able to move back in. The insurance company, however, has sued both the hair dryer manufacturer and Amazon to recover the money, asking a court to order reimbursement of more than $850,000.

The suit has been tied up in court and may raise the question of what, exactly, Amazon is. For years, the online retail company has argued that many of its customers are simply passing through to use its platform — that the buyer and seller of the product are connecting, and Amazon is merely a passing intermediary.

The argument has given Amazon a crucial legal defense, allowing it to completely sidestep the liability that conventional retailers face. For the most part, courts have been satisfied by the claim, and Amazon has been able to expand its third-party seller business into hundreds of billions of dollars in sales.

Recently, though, that wall has shown signs of fracturing. Some courts and scholars have questioned exactly how far those protections should go, and whether Amazon is truly as hands-off a player as it would like to seem.

“They’re taking affirmative steps to lure the consumer into buying their products or their manufacturer’s products,” says Dennis Crawford, the attorney who is representing Weintraub’s insurance company in its case against Amazon.

The question is: who’s really at fault?

When you buy a product on Amazon, there’s little guarantee that what you’re getting has been expertly vetted for safety. The Wall Street Journal reported this year that more than 4,000 banned, unsafe, and mislabeled products were on the company’s platform, ranging from faulty motorcycle helmets to magnetic toys labeled as choking hazards.

Those faulty products have resulted in serious, sometimes fatal, injuries, setting loose a tidal wave of liability claims. According to court records viewed by The Verge, Amazon has faced more than 60 federal lawsuits over product liability in the past decade. The suits are a grim catalog of disaster: some allege that hoverboards purchased through the company burned down properties. A vape pen purchased through the company exploded in a pocket, according to another suit, leaving a 17-year-old with severe burns.

The list goes on: an allegedly faulty ladder bought on Amazon is blamed for a death. Two days after Christmas in 2014, a fire started at a Wyoming home, blamed on holiday lights purchased through the company. Firefighters found a man inside, facedown and unconscious, according to court filings. He died that night. The results of the suits have been mixed: Amazon has settled some cases, and successfully defended itself in others, depending on the circumstances. (The company declined to comment for this article.)

Throughout the cases, Amazon has taken advantage of its unusual legal status as half-platform, half-store. If Home Depot sells a defective bandsaw, the store can be sued alongside the company that made the product. That liability means conventional retailers have to be careful about the products they stock, making sure every item on store shelves has passed at least the most basic product safety requirements. States have passed different versions of product liability laws, but they all put the burden of fault on more than just the original manufacturer.

But Amazon is more complex: it acts as a direct seller of products, while also providing a platform, called Marketplace, for third parties to sell their products. Tightly integrated into Amazon’s own sales, Marketplace products are often cheaper for consumers, less controlled, and sometimes less reliable than other products — and because Amazon is usually seen as a platform for those sales rather than a seller, the company has far less liability for anything that goes wrong. But because the Marketplace is so intertwined with Amazon’s main “retail” store, it’s easy for customers to miss the difference.

“How many people even really remember after they might briefly see it, when they’re buying a third party product that’s shipped and stocked by Amazon, what the name of that company is?” says John Bergmayer, legal director at the advocacy group Public Knowledge.

Amazon launched Marketplace in 2000, and it didn’t take long for the company to see it was a massive financial winner. Fourth months after its debut, the company announced that monthly gross merchandise sales on the platform had more than tripled. Jeff Bezos announced in 2018 that Marketplace sales made up the majority of transactions on Amazon that year, roughly double Amazon’s first-party retail sales. It’s a $175 billion business for the company, offering the same kind of user-driven scale that fuels social media companies like Facebook. The model has been so successful that the company reportedly shifted more resources toward third-party sellers last year, courting frustration from wholesalers.

As Amazon tells it, Marketplace is more like Craigslist than Home Depot. The company is providing technology to connect two people — a buyer and a seller — but anything that goes wrong is their responsibility. The logic, for most courts, has been compelling. “Certainly the status quo is they’re not liable,” says Mark Geistfeld, a professor of civil litigation at New York University.

But a recent decision from a federal circuit court has thrown the status quo into doubt. In 2014, a woman named Heather Oberdorf lost vision in one eye after a dog leash she’d ordered from an Amazon Marketplace seller broke as she took her dog for a walk. Oberdorf sued Amazon, arguing that it was negligent for having the product on its platform.

Oberdorf lost the case in a Pennsylvania district court, but the decision was reversed on appeal. That court decided Amazon was so involved in the purchasing process that the company meets the definition of a “seller” of products under state law, and so could be held liable for defective third-party products on its platform. (Amazon has also claimed protections under Section 230 of the Communications Decency Act, which protects online platforms from user actions, but has had less success with the defense.)

If Amazon is held liable for every mishap caused by products on its third-party Marketplace, the result could be a serious hit to Amazon’s bottom line. Already, the company has said it may spend billions of dollars to stop the spread of dangerous goods. Amazon is currently seeking a review of the Oberdorf decision, and the decision has meanwhile been vacated, as cases in multiple states have been put on hold while the situation shakes out.

For scholars like Geistfeld, this change in perspective has been a long time coming. The appeals court decision against Amazon was “the better reasoned opinion, and even that could have been stronger,” Geistfeld says.

“If you look at the body of law defining what a seller is, and look at Amazon in comparison,” he says, “[it’s] hard to see why the corner deli is deemed to be a seller for all the stuff in the store there, and the amount of control they have for safety and the like is much less than what Amazon has.”

Geistfeld isn’t the only legal scholar taking that line of thinking. In an academic paper set to be published next year in the Brooklyn Journal of Corporate, Financial & Commercial Law, two professors argue that Amazon acts as a “heavy hand” in its Marketplace, closely influencing purchases on its platform. “In our view,” the professors write, “the courts do not grasp the magnitude of the problem or the reality of the situation.” The company’s “contention that it is a neutral platform that simply facilitates sales between sellers and buyers is a myth,” they conclude.

The two argue that Amazon influences winners and losers through the placement it gives products on its platform, including the coveted “buy box,” where sellers compete to appear. In some cases, the company works with merchants to offer fulfillment services. Through services Amazon Prime, the company directly places its brand ahead of the product. Taken together, the professors say, this makes Amazon much more than a background player just facilitating a transaction.

Aaron Twerski, a professor at Brooklyn Law School and one of the authors of the paper, says “Amazon’s got its fingers all over the sale from the beginning to the end.” The average consumer buying through Amazon has no idea of the logistics that go into shipping a product. For most people, buying through Amazon means buying from Amazon. “You’d have to be a genius to figure out what’s going on,” Twerski says.

But while Twerski and others push to change the legal precedent, defective third-party products are still doing damage — and Amazon is still getting off the hook.

In November 2015, a Tennessee family bought a hoverboard through Amazon as a Christmas gift. But in January, according to a suit the family later filed, the hoverboard caught fire, which rapidly spread through the house. Two of the children were trapped upstairs and, with the stairs down blocked by the growing blaze, forced to jump from the second story of the home. Steve Anderson, a Tennessee attorney who’s worked on the Fox family’s case, says the pair fortunately had “no serious lifelong injuries — physically, certainly.”

The family sued Amazon and the third-party company that sold the hoverboard, but Amazon argued again that it’s not a “seller” under the meaning of the law. After losing a court decision, the family appealed the ruling, and had some limited success — the appeals court sent one part of the decision back for further deliberations. But despite how closely Amazon was involved in the process, the company still hadn’t met the definition of a seller under Tennessee law, the court found.

The court “certainly goes on at some length about the possibility that Amazon could be a seller under certain circumstances, but that the circumstances did not rise to that level in our case,” Anderson says. Those clauses suggest Amazon’s liability shield might be starting to crack — but that kind of caveat still won’t do much good for the family.

“It’s a big issue because they are in control,” Anderson says. “When this thing went poorly, when the hoverboard started to have a problem, who decided to take them off the market? Amazon.”

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