Earlier in July, the US Consumer Product Safety Commission filed a lawsuit against Amazon alleging the retailer was failing to do enough to prevent the sale of hazardous items through its FBA platform. Some of the products cited in the lawsuit include flammable children’s pajamas, ineffective carbon monoxide protectors and potentially malfunctioning hair dryers—all of which failed to comply with US CPSC safety standards.
While Amazon has taken several unilateral actions, including offering free refunds, notifying customers of the potential safety hazards of the cited products and removing the SKUs, the CPSC claims Amazon’s actions are insufficient to remediate the safety hazards. While Amazon’s policy has always maintained the free replacement of damaged or malfunctioning items from third party sellers, it doesn’t indicate legal responsibility for any injuries occurring. Is the CPSC’s aggressive stance a preventative measure—or is it part of a growing trend specifically targeting online platforms on behalf of US federal agencies?
Amazon, Product Liability and Overseas Sellers
It’s important to understand the functional difference between product liability law and safety in the US. While product liability law can affect any number of parties in the distribution chain, there is no general federal common regulatory law on product liability. It’s typically based on previous cases and appellates established from state to state.
Yet the CPSC has set in place extremely strict guidelines and regulatory statutes regarding the manufacturing, sale and distribution of consumer products. And both statewide and federal liability statutes are becoming increasingly more complex as eCommerce is becoming a dominant retail force. California Act HB 3262 would potentially require online marketplaces to be held liable for all damages caused by defective products in addition to manufacturer liability. And it shouldn’t be a surprise that the bill would also affect third party sellers on Amazon, regardless of their country of operation.
The vast majority of the products cited in the CPSC suit were manufactured overseas. Yet the regulations enforced by the CPSC typically only apply to domestically manufactured products. And their ability to recall overseas products is relatively limited. While the chain of accountability indicated by the suit specifically targets Amazon as a distributor in the supply chain, it doesn’t hold that Amazon had foreknowledge of the hazards of the products. How will the suit affect Amazon FBA sellers both domestic and abroad?
Amazon FBA and New Regulatory Guidelines
Domestic FBA sellers are bound to an official business solutions agreement stating they must indemnify and hold Amazon harmless for any faulty claims sold through their marketplace. Yet the new suit specifically holds Amazon at fault for safety hazards caused by non-compliant products. The crackdown could potentially force Amazon to adopt even stricter policies on the manufacturing and sale of consumer products—in particular, brands manufactured in China.
“Today’s vote to file an administrative complaint against Amazon was a huge step forward for this small agency,” said Acting CPSC Chairman Robert Adler. “But it’s a huge step across a vast desert—we must grapple with how to deal with these massive third-party platforms more efficiently, and how best to protect the American consumers who rely on them.”
Amazon has already announced new regulatory changes on the sale of many popular products; in particular, dietary supplements which must now carry a certificate of authority from a certified ISO/IEC 17025 lab attesting to unadulterated ingredients. More recently, they announced the prohibition of supplements containing the popular antioxidant NAC owing to a controversy between the FDA and manufacturers over the difference between a supplement and a drug. Yet as the CPSC suit proves, lawmakers feel Amazon’s preliminary steps may not be enough to meet federal standards.
FBA sellers should be aware that changes are likely to occur in the coming months as to how Amazon regulates product lines. And there’s a strong likelihood that continuing consumer and government pressure will affect FBA altogether. Amazon’s taken a lot of flack in recent months over regulatory oversight. It’s up to sellers to know there’s a strong chance it will affect how they continue to do business altogether. That begins with keeping up to date with any changes to seller policy and to act accordingly. It may be a short term hassle. But it’s a small price to pay for the longevity of your sales on Amazon.
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