Amazon Marketplace and Third-Party Sellers: The Battle over Strict ...

Amazon Marketplace and Third-Party Sellers: The Battle over Strict Product Liability

"Amazon is fully capable, in its sole discretion, of removing unsafe products from its website. Imposing strict liability upon Amazon would be an incentive to do so."1

I. INTRODUCTION

Strict product liability is the legal theory that holds distributors, manufacturers, or sellers liable for any injury to a customer resulting from a defective product, regardless of whether the consumer is at fault.2 Since its inception in 1944, state legislatures across the United States have overwhelmingly adopted this tort.3 Following the rapid growth of e-commerce throughout the last decade, product liability now applies to more than just brick-and-mortar retailers.4

1. Oberdorf v. Inc., 930 F.3d 136, 146 (3d Cir. 2019), vacated and reh'g granted by 936 F.3d 182 (3d Cir. 2019).

2. See Strict Products Liability, BLACK'S LAW DICTIONARY (11th ed. 2019) (defining strict products liability); Ken LaMance, What Is Strict Product Liability?, LEGALMATCH, [] (last modified Mar. 20, 2020, 5:39 PM) (defining doctrine); see also Escola v. Coca Cola Bottling Co., 150 P.2d 436, 440 (Cal. 1944) (Traynor, J., concurring) (arguing manufacturers should incur "absolute liability" of all products). Justice Traynor added in his concurrence that it was in the public's best interest to hold parties involved in the manufacturing and sale of goods strictly liable for product defects. See Escola, 150 P.2d at 440-41 (demonstrating Justice Traynor's pivotal viewpoint seeking to protect public). Justice Traynor empathized with the consumer, stating that "[t]hose who suffer injury from defective products are unprepared to meet its consequences." See id. at 441. Justice Traynor further recognized that companies can absorb the cost of preventing defective products from entering the market by including that cost in the price of the product and treating it as part of the cost of doing business. See id. (outlining Justice Traynor's proposed treatment of product liability).

3. See Ryan Bullard, Note, Out-Teching Products Liability: Reviving Strict Products Liability in an Age of Amazon, 20 N.C. J.L. & TECH. ONLINE 181, 183 (2019), /4/2019/05/Bullard_Final.pdf [] (explaining foundation of strict product liability). Strict product liability has evolved over time to meet the changing needs of society and best protect consumers. See id.

4. See Press Release, U.S. Census Bureau News, Quarterly Retail E-Commerce Sales: 2nd Quarter 2020 (Aug. 18, 2020), [] (showing e-commerce growth over time); Ecommerce Product Liability 101: Protecting Yourself & Your Business, PIXEL UNION (Sept. 23, 2016), [] (describing product liability tips for e-commerce) [hereinafter Ecommerce Product Liability 101]. Recommendations for internet vendors include providing detailed descriptions of each product and including a terms and conditions page, so consumers understand how product liability is handled. See Ecommerce Product Liability 101, supra. It is important to note that a clause placing limitations on liability does not mean that the e-commerce company will be completely absolved from liability if a consumer is injured by a defective product because the clause may not always be enforceable. See id.

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Online businesses face a variety of product liability issues because consumers are able to purchase items with the click of a button.5 Additionally, allowing internet retail companies to avoid strict product liability for products sold by third-party sellers poses a unique risk to e-commerce consumers.6 As the largest online retailer in the United States, Amazon is no stranger to these issues.7

Over the past twenty years, Amazon has grown to dominate e-commerce in the United States.8 Many consumers, however, may not be aware of the difference between Amazon Retail and Amazon Marketplace.9 Amazon Marketplace is Amazon's platform that allows third parties to sell their goods to consumers without selling the brand to Amazon.10 With sales of $175 billion in 2018, Amazon Marketplace makes up about two-thirds of Amazon's total profit and is considered the largest online retailer in the country.11 EBay trails in second place

5. See Ecommerce Product Liability 101, supra note 4 (detailing potential liability risk for online retailers). One of the greatest differences between traditional brick-and-mortar retail and online shopping is "the degree to which customers can inspect and interact with products." See id. Online shoppers cannot physically handle the product and, consequently, they rely on the retailer to provide information they could otherwise gather on their own. See id.

6. See Bullard, supra note 3, at 183-84 (stating e-commerce poses challenge for strict product liability tort).

7. See Walter Loeb, Who Are the Top 10 U.S. Online Retailers?, FORBES (Aug. 6, 2018, 7:10 AM), [] (showing Amazon top online retailer); see also Ecommerce Product Liability 101, supra note 4 (identifying strict product liability risk).

8. See Emily Dayton, Amazon Statistics You Should Know: Opportunities to Make the Most of America's Top Online Marketplace, BIGCOMMERCE BLOG, [] (demonstrating Amazon's dominance in e-commerce). More than 197 million people visit each month, and Amazon sells over twelve million products in a variety of different categories, including computers, apparel, and food and beverages. Id.; see Loeb, supra note 7 (describing Amazon's various products across industries). An Amazon Prime membership allows customers who pay a yearly fee to have access to free, two-day shipping on Prime products. See Dayton, supra (listing Amazon Prime membership benefits). Ninety-five million people in the United States had Amazon Prime memberships by the end of 2018, demonstrating a commitment to shopping on the Amazon platform. See id. Each year, Amazon Prime members spend an average of $1,400 on Amazon. Id.

9. See Juozas Kaziuknas, Amazon Marketplace Is the Largest Online Retailer, MARKETPLACE PULSE (Dec. 3, 2018), [] (discussing Amazon Marketplace's third-party model). Unlike other marketplaces, Amazon does not openly advertise Amazon Marketplace, its third-party retailer platform. Compare id. (noting Amazon does not ordinarily allude to separate Amazon Marketplace), with infra note 50 (describing presentation of eBay to consumers). Amazon Marketplace is coherent with the Amazon platform, and it is often difficult for consumers to tell whether an item is being sold by a third-party retailer or by Amazon itself. See Kaziuknas, supra. Because of this, "sales volume goes through [the Amazon Marketplace] almost invisibly" as shoppers do not notice the difference between a transaction with a third party and Amazon itself. Id.

10. See id. (explaining Amazon Marketplace and comparing it to competitors); see also Bullard, supra note 3, at 193 (describing distribution process for third-party products). Amazon has such a large variety of products on its website by allowing third-party vendors to access its customer base. See Bullard, supra note 3, at 193. Amazon lets third parties choose between three fulfillment methods, each of which designate different responsibilities to Amazon and the third party in fulfilling consumers' purchase orders. See id.; see also infra note 41 and accompanying text (explaining each fulfillment method along with advantages and disadvantages).

11. See Kaziuknas, supra note 9 (outlining size of Amazon Marketplace in numbers); see also Lina M. Khan, The Separation of Platforms and Commerce, 119 COLUM. L. REV. 973, 985-86 (2019) (stating Amazon

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behind Amazon Marketplace for third-party platforms and is five times smaller in sales.12 Consumers and other retailers often overlook Amazon's domination of third-party sales, as they are not always aware of the difference between Amazon Marketplace and Amazon Retail.13

Amazon recently faced a plethora of lawsuits regarding Amazon Marketplace and strict product liability.14 When consumers buy a product from a third party on Amazon Marketplace and are subsequently harmed, they may file a strict product liability suit against Amazon.15 In these cases, Amazon has argued that it is not the technical "seller" of products on Amazon Marketplace for strict liability purposes and instead asked customers to seek recourse from the third party.16 Contacting third-party sellers has been difficult in situations where the injured consumer cannot locate the third-party seller or the seller no longer exists.17 Several circuit courts recently decided this liability issue, resulting in conflicting decisions regarding whether courts should consider Amazon to be the "seller" of third-party products.18

captures "52.4% of all U.S. online retail spending"). In addition, 54% of all internet product searches begin on Amazon's platform. Khan, supra, at 986.

12. See Kaziuknas, supra note 9 (comparing eBay to Amazon Marketplace). Amazon's revenue and control of the market share in comparison to eBay demonstrates the extent of Amazon's e-commerce superiority. See id.

13. See id. (indicating Amazon Marketplace not common knowledge); see also Khan, supra note 11, at 988 (observing Amazon's exploitation of Amazon Marketplace operator and merchant positions simultaneously). Because Amazon itself acts as a merchant of its own Amazon-brand goods, those products have two prominent advantages over products sold on Amazon Marketplace. See Khan, supra note 11, at 988. First, Amazon strategically implements policies that benefit its own products by giving Amazon "greater control over brands and pricing." See id. Second, Amazon deliberately favors itself over other retail competitors on Amazon Marketplace by using an algorithm that recommends Amazon's own products first. See id. Because about 82% of Amazon sales are made on the top listing for a product, Amazon effectively places its own products in a more favorable position. See id.

14. See, e.g., Erie Ins. Co. v. , Inc., 925 F.3d 135, 137 (4th Cir. 2019) (summarizing issue in case against Amazon for defective product sale); Fox v. , Inc., 930 F.3d 415, 418 (6th Cir. 2019) (stating complaint against Amazon for defective product sale); see also Kate Cox, Court Rules Amazon Can Be Held Responsible for Defective Third-Party Goods, ARSTECHNICA (July 8, 2019, 2:55 PM), [] (explaining Amazon's recent lawsuits regarding marketplace liability). Amazon argued that consumers can trace each third-party product sold on Amazon Marketplace back to the product's specific vendor and that Amazon is not the true "seller" of Amazon Marketplace products. See Erie Ins. Co., 925 F.3d at 137, 142. The Third Circuit, however, stated that Amazon enables third parties to "conceal themselves from the customer" by only allowing communication between customers and the third parties to occur through the Amazon platform. See Oberdorf v. Inc., 930 F.3d 136, 145 (3d Cir. 2019), vacated and reh'g granted by 936 F.3d 182 (3d Cir. 2019).

15. See Cox, supra note 14 (describing product liability suits against Amazon). 16. See Erie Ins. Co., 925 F.3d at 137 (explaining Amazon motion for summary judgment because not technical seller); Cox, supra note 14 (stating Amazon's argument against liability for third-party products). 17. See Cox, supra note 14 (noting challenges of third-party purchases). 18. See, e.g., Oberdorf, 930 F.3d at 153 (holding Amazon technical seller under strict liability theory); Milo & Gabby LLC v. , Inc., 693 F. App'x 879, 885-86 (Fed. Cir. 2017) (determining Amazon not seller under ordinary meaning of term); see also Cox, supra note 14 (outlining recent court decisions regarding Amazon liability).

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This Note examines the risks and potential ramifications of not holding Amazon liable for defects in third-party products sold through Amazon Marketplace.19 Section II.A discusses the history and evolution of consumer protection jurisprudence in the United States.20 Section II.B provides an overview of the recent decisions regarding Amazon Marketplace liability, specifically Oberdorf v. Inc., and the precedent these decisions set.21 Section II.C evaluates other online marketplaces and compares their product liability exposure to Amazon's.22 Section II.D assesses Amazon's defense, the Communications Decency Act (CDA), and in particular, section 230 (CDA 230) and its application to third-party products.23 Part IV argues that Amazon should be considered the "seller" of third-party products on Amazon Marketplace to protect consumers and incentivize safe practices.24

II. HISTORY

A. Consumer Protection: Strict Liability

1. Evolution of Strict Product Liability in the United States

Strict product liability in the United States began to develop in the early 1900s.25 Before this theory existed, courts required direct privity between consumers and the manufacturer to recover for any injury caused by a defective product.26 As the United States industrialized and the production of goods evolved, so did tort law surrounding new products for sale, and courts became increasingly concerned about public safety.27 In 1944, Justice Roger Traynor established the concept of strict liability in his concurring opinion to a California

19. See Cox, supra note 14 (indicating lack of recourse for Amazon Marketplace consumers). 20. See infra Section II.A (articulating consumer protection legal history); see also Bullard, supra note 3, at 186-87 (providing background regarding consumer protection). 21. See infra Section II.B (offering recent cases involving Amazon Marketplace); see also Oberdorf v. Inc., 930 F.3d 136, 153 (3d Cir. 2019), vacated and reh'g granted by 936 F.3d 182 (3d Cir. 2019). The court held that Amazon was the "seller" of products in its third-party Amazon Marketplace under Pennsylvania tort law for strict product liability purposes. See Oberdorf, 930 F.3d at 153. 22. See infra Section II.C (highlighting other online marketplaces' liability exposure); see also David Berke, Article, Products Liability in the Sharing Economy, 33 YALE J. ON REGUL. 603, 622-23 (2016) (discussing products liability and eBay). 23. See infra Section II.D (assessing Amazon's defense). See generally 47 U.S.C. ? 230 (providing language of CDA 230). 24. See infra Part IV (opining Amazon liable third-party "seller"); see also Cox, supra note 14 (discussing results of recent decisions regarding Amazon strict product liability). 25. See Bullard, supra note 3, at 185-86 (describing development of strict product liability). 26. See id. at 184 (introducing history of products liability law); see also MacPherson v. Buick Motor Co., 111 N.E. 1050, 1053 (N.Y. 1916) (creating customer recourse against manufacturer). The court in MacPherson effectively removed the privity requirement and allowed injured consumers to seek recourse against manufacturers. See MacPherson, 111 N.E. at 1053. 27. See Francis J. O'Brien, The History of Products Liability, 62 TUL. L. REV. 313, 318 (1988) (stressing increase in importance of public safety to courts during relevant time period); see also Bullard, supra note 3, at 185 (noting exceptions to privity rule after innovative industries developed).

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Supreme Court case.28 Justice Traynor continued to advocate for strict product liability in later cases, grounding his conclusions in public policy, social responsibility, and safety concerns for consumers.29 Greenman v. Yuba Power Products, Inc.30 was another formative case for the strict product liability doctrine, as the Supreme Court of California adopted Justice Traynor's theory of strict product liability and held the manufacturer strictly liable.31 The Restatement (Second) of Torts (Restatement) closely tracks Justice Traynor's strict liability concept in its own strict product liability doctrine, which exposes any party in the chain of production to potential liability.32

2. Adoption of Strict Product Liability

According to the Restatement, those involved in selling or distributing products are subject to liability for any harm caused to the consumer.33 While there is no federal statute for strict product liability, every state has adopted some version of product-seller negligence laws for conduct occurring in the distribution

28. See Escola v. Coca Cola Bottling Co., 150 P.2d 436, 440 (Cal. 1944) (Traynor, J., concurring) (establishing strict product liability). In his concurrence, Justice Traynor stated that "it should now be recognized that a manufacturer incurs an absolute liability when an article he has placed on the market, knowing that it is to be used without inspection, proves to have a defect that causes injury to human beings." Id. at 440. Justice Traynor further stated that it was in the public's best interest to hold retailers liable along with manufacturers. See id. at 441-42. Establishing this liability, he reasoned, further protected consumers regarding the product's safety. See id. at 442; Bullard, supra note 3, at 186 (recognizing Justice Traynor's concurrence instrumental in strict product liability law).

29. See Escola, 150 P.2d at 440, 442 (Traynor, J., concurring) (describing reasons for developing first strict product liability precedent); Vandermark v. Ford Motor Co., 391 P.2d 168, 172 (Cal. 1964) (arguing spreading loss minimizes liability burden on manufacturer and retailer); see also Bullard, supra note 3, at 187-88 (outlining Justice Traynor's strict liability jurisprudence).

30. 377 P.2d 897 (Cal. 1963). 31. See id. at 901 (relying on earlier California decisions and Justice Traynor's concurrence in Escola). The court in Greenman held:

To establish the manufacturer's liability it was sufficient that plaintiff proved that he was injured while using the Shopsmith in a way it was intended to be used as a result of a defect in the design and manufacture of which plaintiff was not aware that made the Shopsmith unsafe for its intended use.

Id. The court adopted Justice Traynor's reasoning that manufacturers are in a better position than customers to inspect products and that imposing this duty on manufacturers would result in a safer marketplace. See id. (explaining Greenman court's reasoning for adopting strict product liability); see also Escola, 150 P.2d at 440 (Traynor, J., concurring) (advocating public policy demand strict product liability laws); Zachary M. DuGan, Comment, 3-D Printing & Products Liability Law: Are Individuals Printing Themselves into Strict Products Liability?, 26 WIDENER L.J. 187, 201 (2017) (describing logic behind strict product liability).

32. See RESTATEMENT (SECOND) OF TORTS ? 402A (AM. L. INST. 1965) (establishing strict product liability); Bullard, supra note 3, at 191-92 (stating Restatement closely matches Justice Traynor's policy intent).

33. See RESTATEMENT (SECOND) OF TORTS ? 402A cmt. f (AM. L. INST. 1965) (subjecting all parties involved in product development to liability); see also Ellen Wertheimer, Unknowable Dangers and the Death of Strict Products Liability: The Empire Strikes Back, 60 U. CIN. L. REV. 1183, 1184-85 (1992) (defining strict product liability and associated goals).

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