In a decision that could have major ramifications for Amazon’s e-commerce business, a federal regulator ruled Tuesday that the tech giant is a distributor and bears responsibility for faulty products sold on its marketplace.
The unanimous ruling from the U.S. Consumer Product Safety Commission sets a clear standard for a what was a legal grey area related to Amazon’s responsibility for recalled products sold by third-party sellers, which make up more than half of the company’s e-commerce sales.
Amazon has long contended that it shouldn’t be held legally liable for defective products sold by third-party merchants on Amazon.com, maintaining that the liability rests with the seller, not with the marketplace facilitating the sale.
The commission “determined that Amazon was a ‘distributor’ of products that are defective or fail to meet federal consumer product safety standards, and therefore bears legal responsibility for their recall,” according to a press release.
The agency said more than 400,000 products are subject to its order, including faulty carbon monoxide (CO) detectors, hairdryers without electrocution protection, and children’s sleepwear that violated federal flammability standards.
“Amazon failed to notify the public about these hazardous products and did not take adequate steps to encourage its customers to return or destroy them, thereby leaving consumers at substantial risk of injury,” the agency said.
Amazon must submit a plan to notify customers and the public about the hazardous products, and remove them “by incentivizing their return or destruction,” according to regulators.
In a statement, Amazon said it was “disappointed” by the CPSC’s decision and plans to appeal. “When we were initially notified by the CPSC three years ago about potential safety issues with a small number of third-party products at the center of this lawsuit, we swiftly notified customers, instructed them to stop using the products, and refunded them,” a spokesperson said.
The USPSC sued Amazon in 2021 in an attempt to force the retailer to accept legal responsibility for recalling defective products sold on its marketplace by third-party sellers.
Later that year, Amazon announced that it would directly compensate customers for valid claims of property damage or personal injury caused by third-party products sold on its platform, up to $1,000, or more in certain situations.
In its statement, Amazon said it has “proactive measures in place to prevent unsafe products, and we continuously monitor the listings in our store. If we discover an unsafe product available for sale, we address the issue immediately, and refine our processes.”