Amazon.com is facing a government order that could make it responsible for the safety of goods that it sells for outside vendors on its website and ships for them through its logistics network.
The U.S. Consumer Product Safety Commission is preparing an order that could classify Amazon’s online retail business as a distributor of goods, according to people familiar with the matter. That designation could give Amazon the same safety responsibilities as traditional retailers and potentially open Amazon up to lawsuits and extensive recalls over items sold through its website. Amazon accounts for nearly 40% of all e-commerce in the U.S., according to eMarketer, a research firm.
Amazon has fought the distributor designation because of the nature of its online marketplace. The company sells some items from its own inventory, as bricks-and-mortar stores do, but more than 60% of sales on Amazon.com are by outside vendors, known as third-party sellers.
Amazon has said that it invests in product safety across its site. It also has argued that for those third-party sales it is merely a platform for sellers and buyers to connect, and therefore isn’t responsible for ensuring the quality and safety of products sold by outside vendors on its site.
The commission’s order could negate such arguments from Amazon, and from other marketplaces and technology companies that are similarly structured and have argued that they aren’t legally responsible for what others do on their platforms, according to one of the people familiar with the matter.
A majority of the agency’s four current commissioners would have to vote in favor of the order for it to advance.
“Safety is important to Amazon, and we want customers to shop with confidence in our store,” said an Amazon spokesman. The company takes steps to prevent suspicious or noncompliant products from being listed, monitors products for safety concerns, and removes products when appropriate and notifies the companies and government agencies involved, he said.
The consumer safety agency began investigating Amazon in 2019 after a series of articles in The Wall Street Journal chronicled how Amazon’s marketplace side of its retail operations had sellers distributing dangerous and mislabeled products, such as children’s toys lacking proper choking-hazard warnings, motorcycle helmets that failed federal safety tests and children’s toys that contained lead levels exceeding federal limits.
In 2021, the commission sued Amazon for distributing unsafe products from sellers on its website through Fulfillment by Amazon, which handles logistics for third-party sellers. The agency cited three specific products in that suit: children’s pajamas that failed flammability tests, a carbon monoxide detector that failed to detect carbon monoxide accurately and hair driers without the required shock protectors in the plug.
Amazon issued credits to customers who bought the items and told them to stop using them.
Amazon responded to the commission’s suit by saying that the agency didn’t have the legal power to make such claims against the company because it was acting as a marketplace and a “third-party logistics provider” rather than a distributor.
An administrative law judge determined that Amazon did have distributor status and responsibility. Amazon appealed, setting the stage for the commission’s impending vote.
The volume of faulty, dangerous or mislabeled items sold by Amazon third-party sellers is much more extensive than the three items in the agency’s suit, according to the people familiar with the matter, and an order from the agency would likely make the company susceptible to customer lawsuits and more-rigorous enforcement from the federal government well beyond the named products.
Amazon’s marketplace for third-party sellers, launched in 2000, has been the linchpin to its dominance in online retail. Marketing and shipping goods from outside vendors to its customers dramatically increased selection on Amazon’s website, attracting more customers and eventually making it a one-stop shop for everything from electronics to vitamins.
Third-party sellers aren’t necessarily subject to the same scrutiny as vendors trying to sell at a major traditional U.S. retailer. Many outside sellers are based in China or other countries with different product-safety regimens. Some small resellers in the U.S. have been found to dupe customers by selling items of dubious quality.
The Journal reported in 2019 that individuals were reselling items they found in the trash on Amazon and delivering them through its Fulfillment by Amazon business, which stores and ships products from many third-party sellers. Amazon at the time updated its policy to explicitly prohibit selling items taken from the trash.