PA Supreme Court To Determine Amazon's Liability For Third-Party Sales

Amazon skirting liability for defective and dangerous products under scrutiny.

July 23, 2020, Los Angeles, CA – The Pennsylvania Supreme Court will decide if Amazon should be held liable as a “seller” for injuries, death, or property damage caused by defective products sold by third-party vendors on its website. About 60% of Amazon sales are from third-party "Marketplace" sellers.

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 for negligence for having the product on its platform, and unable to locate the seller. Oberdorf lost the case in a Pennsylvania district court, but the decision was reversed on appeal.

Amazon enables and facilitates unvetted merchants, often in China, to sell counterfeit, fraudulent, replica, and dangerous products, and taking a fee for each item sold. For years, Amazon successfully thwarted lawsuits for third-party Marketplace sales on its platform claiming, albeit collecting a fee, warehousing, and delivering the items, it is "merely a venue" for the sale of such products, as opposed to being the actual seller.

Amazon also influences winners and losers through the placement it gives products on its platform, including the coveted “buy box” where sellers compete to appear, commingles seller's products, and places its coveted "Amazon's Choice" endorsement on counterfeit and fraudulent products

Amazon sidesteps the liability that conventional retailers face, making Marketplace sales a massive financial winner. Four months after its debut, Amazon announced that monthly gross merchandise sales on the platform more than tripled.

“Amazon’s customers are particularly vulnerable in situations like the present [Oberdorf] case,” Senior Judge Jane Richards Roth said. “Neither the [plaintiffs] nor Amazon has been able to locate the third-party vendor, The Furry Gang. Conversely, had there been an incentive for Amazon to keep track of its third-party vendors, it might have done so.”

Lawsuits against Amazon for third-party sales are not new. According to 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 and injuries, with cases in multiple states put on hold while the situation shakes out. 200,000 brands are fighting counterfeits on Amazon.

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,” writes Aaron Twerski, a professor at Brooklyn Law School. “The courts do not grasp the magnitude of the problem or the reality of the situation.” Amazon's “contention that it is a neutral platform that simply facilitates sales between sellers and buyers is a myth,” they conclude. 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.

Liability for online stores and marketplaces, including Amazon, eBay, and Walmart, is is long overdue. Counterfeit, fraudulent, fake, and replica items have become rampant on e-commerce websites, hurting buyers, destroying manufacturers, and crushing legitimate businesses.

“Consumers should be able to trust that what they see and purchase online is what they will get, but counterfeiters continue to join platforms with ease and masquerade as reliable sellers in order to infect American households with dangerous and unsafe counterfeit products. Consumer lives are at risk because of dangerous counterfeit products that are flooding the online marketplace" says Rep. Jerrold Nadler (D-NY). Nadler has introduced the bipartisan SHOP SAFE bill that will establish trademark liability for online Marketplace platforms when a third-party sells a counterfeit product that poses a risk to consumer health or safety.  

This should not be confused with products Amazon itself directly sells on its platforms. A U.S. Federal Court lawsuit, Maglula, Ltd. v. Amazon.com, names Amazon as repeatedly being the direct seller of counterfeit Maglula products, including the sale of returned counterfeit Maglula merchandise to third-party liquidation-centers for resale. Daimler AG, the parent company of Mercedes-Benz, also sued Amazon claiming the e-commerce giant was a direct-seller and distributor of counterfeit Mercedes-Benz products. The case was settled and sealed.