Federal Court Ruling Exposes Amazon To Huge Liability

Amazon could pay dearly for the fakes, fraud, and scams on its website

July 4, 2019, Los Angeles, CA – Consumer protection received a huge boost Wednesday when a federal appeals court ruled Amazon can be held liable for third-party sales on its website. The e-commerce giant previously dodged liability for about 60% of its sales which originate from unvetted Amazon worldwide marketplace sellers who flood the consumer market with an inexhaustible supply of counterfeit, fraudulent, pirated, and replica items.

While Amazon took half of every U.S. retail dollar spent online and a transaction fee for each item sold, earning over $11 billion in (federal tax-free) profit in 2018, Amazon faced no liability for its third-party transactions. Amazon has faced a slew of criticism and lawsuits for enabling counterfeits and dangerous items on its global websites, and the decision could leave Amazon vulnerable to a flood of new lawsuits.

Amazon repeatedly argues that it is not a "seller" because it merely provides the platform, but the appeals court on Wednesday said it disagrees.

The ruling follows a 2016 complaint from Heather Oberdorf saying she was blinded in one eye when a retractable dog leash she bought through Amazon's website snapped and recoiled. The seller, The Furry Gang, was based in Nevada at the time but has since reportedly vanished into the wind.

Circuit Judge Jane Richards Roth wrote in Wednesday's ruling that Amazon may be liable because the company "enables third-party vendors to conceal themselves from the customer, leaving customers injured by defective products with no direct recourse to the third-party vendor." Adding; "There are numerous cases in which neither Amazon nor the party injured by a defective product, sold by Amazon.com, were able to locate the product's third-party vendor or manufacturer." (3rd. Circuit No. 18-1041)

The appeals court also found that the Communications Decency Act (CDA), the law that protects online companies from being held liable for content posted by users, only protects Amazon from elements of Oberdorf's claims; "To the extent that Oberdorf's negligence and strict liability claims rely on Amazon's role as an actor in the sales process, they are not barred by the CDA," the court found.

Amazon's problems are enormous; Amazon reported they receive an infringement notice for 1 of every 100 customer page views, and over 100,000 brands have signed in to fight counterfeits on Amazon -- a shocking revelation of the scope of Amazon's counterfeit and marketing problem.

While Amazon is a direct retailer of counterfeit and fraudulent goods, e.g. "ships from and sold by Amazon.com," the lawsuit targets sales from Amazon's difficult to identify third-party marketplace, who also utilize Amazon Prime, Amazon Warehouse Deals, and the Fulfilled by Amazon ("FBA") programs which are plagued with counterfeit, fraudulent, and replica items. Some are even endorsed with Amazon's coveted "Amazon's Choice" designation.

Amazon's actual role in the sales process;

• Amazon's highly manipulative and hyper-competitive marketplace controls the internet search, keywords, results, and sellers, affecting how price, product information, and reviews actually reach the consumer
• Amazon controls the listing content, style, endorsements, product reviews, seller reviews, payment processing, shipping and buyer information
• Amazon obfuscates the origin and source and provides fulfillment services creating the illusion the product is from Amazon and has the backing or endorsement of Amazon
• Vendors and consumers can only communicate through Amazon

Amazon fails to vet third-party sellers for amenability to legal process, and has no incentive for the safety of third-party sales. The Counterfeit Report, an award-winning consumer advocate and counterfeit watchdog, found over 132,800 fake, fraudulent and replica items on Amazon, and removed 59,159 fakes on behalf of infringed brand owners. Even with the assigned oversight of two Amazon Global Brand Relations Managers, an alarming pattern of deceptive practices and inaction is glaringly apparent, and complaints ignored.

• Dangerous and potentially deadly items remained for weeks, even months, despite hundreds of repeat infringement notices. Sellers often relist, use multiple usernames, or open new accounts.
• Amazon's seller evaluations (feedback) and product reviews are virtually worthless. Negative reviews ( including The Counterfeit Report's product reviews ) are removed by Amazon, while sellers hire businesses to create dummy accounts, purchase products, and write fictitious reviews.

Amazon must be held accountable and liable for its third-party sales. Amazon is in the best position to vet sellers, control who sells on its platform, and protect consumers.