The U.S. Consumer Product Safety Commission (CPSC) recently found Amazon to be a "distributor" with product liability responsibility for products sold on its website. In a July 29, 2024, ruling, the CPSC said Amazon is legally responsible for over 400,000 allegedly hazardous items sold by third-party sellers on its site. Amazon.com, Inc., CPSC Dkt. No. 21-2 (July 29, 2024). This decision and order adopted many, but not all, of the determinations made by an administrative law judge during an administrative proceeding in 2023, highlighting public safety as paramount.
Despite Amazon's arguments to the contrary, CPSC determined that Amazon is a distributor of products through its Fulfilled by Amazon program, per the Consumer Product Safety Act (CPSA), which governs manufacturers, importers, retailers and distributors. Amazon.com, Inc., at p. 2. "Distributor" in this context refers to a person to whom a consumer product is delivered or sold for purposes of distribution in commerce, except that such term does not include a manufacturer or retailer of such product. 15 U.S.C. § 2052(a). Amazon argued that it instead falls under the "third-party logistics provider" definition, or a person who solely receives, holds or otherwise transports a consumer product in the ordinary course of business but who does not take title to the product. Amazon.com, Inc., at p. 6 (quoting 15 U.S.C. § 2052(a)(16)). But CPSC disagreed and concluded that Amazon goes beyond merely receiving and transporting products in its Fulfilled by Amazon program in the following ways:
- Screening products for program eligibility;
- Communicating directly with customer;
- Controlling communications between participants and customers on the Amazon online platform;
- Receiving returned items;
- Enforcing pricing rules for participants;
- Charging clients and participants alike; and
- Determining credits or replacements to customers who return items as well as whether to dispose of the product, place the product back into the program participants' inventory for another sale, or transfer the product to Amazon for sale by Amazon itself. Amazon.com, Inc., at pp. 33-34.
The CPSC further found that "[f]rom pricing and payment processing to packaging, delivery, and tracking on the front end to post-sale customer service, returns, refunds, and recalls on the back end, Amazon exerts extensive control over products sold through its Fulfilled by Amazon program." Amazon.com, Inc., at p. 11. Amazon also alleged free speech and takings claims and other constitutional challenges, which the CPSC determined were not ripe for adjudication or were not persuasive.
Consequences of This Order on Amazon and Manufacturers
Notably, CPSC found Amazon's actions with respect to the products were insufficient to protect the public because, in CPSC's view Amazon:
- Only sent notices to the initial purchasers and not current owners of the product;
- Did not use the term "recall" and properly describe the product hazards in their communications;
- Lacked information to identify the product and understand the recall; and
- Did not sufficiently incentivize consumers to remove the hazardous products.
To remedy these perceived deficiencies, CPSC has ordered Amazon to develop, in consultation with complaint counsel per Section 15(c) of the CPSA, a proposed notification plan that includes direct and public recall notices for commission review and approval, as well as recommendations for dissemination of public notices. CPSC also determined that it is in the public interest to require Amazon to take remedial actions under Section 15(d) to incentivize the removal of hazardous products from consumers' homes.
This ruling is significant not only for Amazon, but also for companies selling their products through the online retail giant, because it now suggests that Amazon may be responsible for facilitating and handling recall notices and procedures for products it did not manufacture. As such, manufacturers would be well advised to carefully review and understand any changes in Amazon's terms or policies resulting from this new ruling.
The Next Battleground
This decision focuses entirely on Amazon's distribution of products through its Fulfilled by Amazon program, which involves Amazon providing warehousing and order fulfillment services from its warehouses. It does not address products sold through the Amazon "Marketplace," in which the merchant lists their products and also handles their own storage, shipping, etc., or contracts it to a third party. This could be the next battleground, where CPSC will likely evaluate the level of control Amazon has on these products to determine whether it can still be a "distributor" under the CPSA.
For More Information
If you have any questions about this Alert, please contact Paul S. Rosenlund, Sean K. Burke, Alyson Walker Lotman, Harry M. Byrne, Gabrielle Pelura, any of the attorneys in our Product Safety, Compliance and Recalls Group or the attorney in the firm with whom you are regularly in contact.
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