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Amazon can be held liable for defective third-party products on its platform, court rules

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Amazon can be held liable for defective third-party products on its platform, court rules

Everyone knows what Amazon is. What started out as an online bookstore has grown beyond everyone’s expectations. Today Amazon is one of the largest e-retailing platforms in the world, generating over $63 billion in gross revenues in the second quarter of 2019 alone! It is a giant among many huge corporations, with China’s AliGroup its only real competitor. However, in July 2019, things changed for the company. 

A Court Ruling Threatening a Digital Giant 

The company is primarily a platform for retail commodities and products. So do not go looking for discounted deals – like my teen who thought we could get discounted Cox internet prices. Amazon only sells physical products for the most part. It sells some ‘by itself, and it allows third parties to sell on its platform as well. Of course, Amazon takes a sizeable chunk out of every third party sale in commissions.

There is nothing new about this business model. Amazon has been successfully employing it for a decade and has grown exponentially. However, with so many products floating around in Amazon’s catalogs, it can get very confusing to assign ownership or responsibility.

A recent decision by an appellate court has found that the e-commerce giant can be held responsible for defective products on its website. Even if third parties sold those products and not Amazon. This ruling threatens to shake the very foundations of Amazon, setting what could possibly be a dangerous precedent for the company.

The Background

It all started way back in 2014. Like many other Americans, Heather Oberdorf bought a collar for her pet dog on Amazon. It is convenient, it is easy, and it gets delivered right to your home. Little did Oberdorf know that this particular collar was dangerously faulty.

While on a walk with her dog, the collar she bought online broke. This snapped back the leash, which caught Heather Oberdorf in the eye. The result? Permanent blindness in one eye because of a defective and dangerous product.

While the seller of the defective collar was not found, Oberdorf took Amazon to court for negligence. A district court in Pennsylvania decided in favor of Amazon, however. Citing Section 230 of the Communications Decency Act, the court found that Amazon was not a “seller” and hence could not be liable. The case went on to an appellate court.

The Appeal

Heather Oberdorf refused to accept that the mammoth corporation had the law on its side. So she challenged the district court’s decision in a court of appeals. On July 3rd, 2019 the court of appeals decided largely in favor of Oberdorf.

The ruling finds that Amazon can, in fact, be responsible for negligence in its role in the supply chain. The court ruled that Section 230 only deals with protecting companies like Amazon from “speech” on their platforms. It found that this protection does not necessarily extend to sales of goods in the real world. The court of appeals directed Heather Oberdorf’s claim to a lower court for review.

Similar Court Cases

According to this piece by Reuters, Amazon has already faced two such cases in two different courts of appeals. There have also been similar claims filed in lower courts. Up until now, both lower courts and appeals courts have found in favor of Amazon.

However, this latest ruling attacks the legal protection Amazon has for its hugely popular platform. The lower court can potentially award a large sum in damages to Oberdorf in compensation for negligence. Tort law in the United States can be unforgiving, where one lost case can translate into a snowballing effect.

The Potential Fallout

Other victims of defective products will definitely start coming forwards following this ruling. It sets a precedent that is dangerous for Amazon, but good news for consumers. Many people believe protecting the average American consumer should be the primary interest of the legal system, not billion-dollar corporations.

For corporations, this is a sobering thought. Nothing frightens corporations more than greedy lawyers. However, huge settlements and punitive damages drive up the costs of doing business. This ultimately translates into the average consumer paying more for their utilities and other services like Cox deals.

Amazon did not immediately offer comment on the appeals court’s decision. All eyes now are on the lower court, to see what measure of punitive damages the court awards. Many applaud the appeals court’s ruling, considering it a great step forward to holding corporations responsible for their actions.

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Rosie Harman is a senior content strategist working for Contour TV. She holds a Master's in Business Administration from The University of Texas at Arlington and has spent the majority of her career working in tech giants in Texas. When she escapes her computer, she enjoys reading, hiking, and dishing out tips for prospective freelancers on her blog.

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