An initial court ruling that Amazon was immune from third-party sellers liability issues was overturned on appeal in July 2019, a decision that will have long-term ramifications for the online retail giant.
The basics of the case are this: Heather Oberdorf, a resident of Pennsylvania, bought a dog leash on Amazon’s third-party marketplace. The dog leash proved to be defective—it snapped off, recoiled, hit her in the face and left her blind in one eye. Oberdord filed suit against Amazon in a straightforward product liability case.
Amazon countered by citing a 1980s ruling that had protected an auction house from liability after a damaged tractor was sold. The lower courts sided with Amazon. But the Court of Appeals for the Third Circuit said otherwise, citing several factors that make Amazon different:
- A third-party vendor can conceal their identity on Amazon’s marketplace. There is no way to ensure that someone like Ms. Oberdorfer could even find the seller of a defective product in order to make a legal claim.
- The size of Amazon means they can exercise more discretion in the products they sell. The retail giant is in a position to receive reports of defective products and prevent distribution.
- The size of Amazon also enables it to spread the liability risk out among vendors, factoring it into the costs they charge for the use of the marketplace—usually commission-based fees. Amazon is also in a position to assess the liability risk associated with each vendor and payout commissions accordingly.
The decision in the Oberdorf case is significant for Amazon, although the fact it was based on factors unique to the online retailer make it unlikely that any impact will reverberate through the third-party seller marketplace.