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Amazon ‘Holds the Bag’ for Defective Products: Court

Amazon’s third-party marketplace enables independent merchants to sell their own products, but who is liable when a product is defective or faulty? According to a recent ruling by California’s Court of Appeal of the Second Appellate District, Amazon is responsible even if it didn’t manufacture the product and only serves as an intermediary to the actual sale.

In its ruling of Loomis v. LLC, the court concluded that Amazon is a “link in the vertical chain of distribution,” but recognized that “e-commerce may not neatly fit into a traditional sales structure.”

The “link in the vertical chain of distribution” is the key phrasing to focus on. While Amazon contends that it serves only as an intermediary, the appeals court held in the ruling that a party that has control over and or influences a product’s production, distribution and marketing, and receives a financial benefit from it, is strictly liable for injury caused by any defects.

Amazon does not have a comment on the Loomis case, but reaffirmed its commitment to product safety and authenticity.

“Amazon invests heavily in the safety and authenticity of all products offered in our store including proactively vetting sellers and products before being listed, and continuously monitoring our store for signals of a concern,” an Amazon rep told Sourcing Journal. “Amazon supports legislation that provides protections for consumers wherever they shop online to ensure all stores are held to the same standards.”

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Kisha Loomis, the plaintiff, filed suit against Amazon in September 2016 for products liability and fraud. The suit stemmed from injuries she says she suffered from an allegedly defective hoverboard, which she purchased from third-party seller TurnUpUp on Amazon’s marketplace. When Loomis’ son charged the hoverboard in her bedroom, both the board and the bedroom caught on fire. Fighting the fire, Loomis suffered burns to her hand and foot.

The trial court initially granted a summary judgment in favor of Amazon, contending it was not part of the chain of distribution for the defective hoverboard and therefore not liable for the plaintiff’s injuries.

But the recent ruling from the appeals court reverses the trial court’s judgment. The court rejected Amazon’s contention that it was merely a service provider and thus not strictly liable for the plaintiff’s injuries.

“Contrary to Amazon’s assertion that it merely provided an online storefront for TurnUpUp and others to sell their wares, it is undisputed Amazon placed itself squarely between TurnUpUp, the seller, and Loomis, the buyer, in the transaction at issue,” said Judge Sam Ohta in the analysis of the court’s majority opinion. “When Loomis wanted to buy a hoverboard for her son, she perused product listings on Amazon’s website. Amazon took Loomis’ order and processed her payment. It then transmitted the order to TurnUpUp, who packaged and shipped the product to Loomis.”

The court also noted that in the post-purchase communication process, TurnUpUp was not allowed by Amazon to communicate with Loomis directly. Additionally, it pointed out that Amazon sent Loomis’ payment to TurnUpUp only after deducting fees, showing that the marketplace served as a conduit for payments within the transaction. Amazon also collected a $39.99 subscription fee from TurnUpUp.

In highlighting the relationship Amazon has with the customer and the seller, whether it’s through communication, payments or order processing, the ruling would have impact well beyond the Amazon marketplace to other platforms like eBay or Walmart.

The appeals court’s ruling has precedent based on a similar California case, Bolger v. LLC, where another appeals court rejected the e-commerce giant’s long-held position that it is merely an intermediary between buyers and its third-party sellers.

In Bolger v. LLC, the appeals court also overturned a trial court ruling reinstating claims from a woman who says she suffered third-degree burns when a defective laptop battery she bought from a third-party seller on Amazon caught fire.

The Bolger court found Amazon was a direct link in the chain of distribution because it accepted possession of the laptop from the seller, stored it in an Amazon warehouse, attracted Bolger to, showed Bolger a product listing, took her payment for the laptop and shipped the laptop to Bolger in Amazon packaging.

In the Loomis case, Amazon held many of the same positions in the chain of distribution, with the only difference being that a third party instead of Amazon shipped the hoverboard to the consumer.

Amazon has not said whether it will appeal the Loomis decision. However, the e-commerce company appealed Bolger, but the California Supreme Court denied Amazon’s petition for review.

In a concurring opinion of the case, Justice John Shepard Wiley criticized the e-commerce giant, saying that “ can control what it created” and is “situated swiftly to learn of and to contain the emerging problem, thereby reducing accidental injuries.”

“Once Amazon is convinced it will be holding the bag on these accidents, this motivation will prompt it to engineer effective ways to minimize these accident costs,” Wiley wrote. “Tort law will inspire Amazon to align its ingenuity with efficient customer safety. Customers will benefit.”