Tech

California court rules Amazon can be liable for defective goods sold on its marketplace

Key Points
  • A California appeals court ruled Thursday that Amazon can be held liable in the state for faulty products sold on its website.
  • The ruling deals a major blow to Amazon, which has for years fought off product liability lawsuits.
  • Amazon's marketplace helped the company deliver record earnings last quarter. 
Peter Endig | AFP | Getty Images

A California appeals court's decision could soon make it harder for Amazon to skirt responsibility for unsafe products sold on its platform. 

On Thursday, the California Fourth District Court of Appeals ruled that Amazon can be held liable for damages caused by a defective replacement laptop battery that caught fire and gave a woman third-degree burns. The woman, Angela Bolger, alleges she bought the laptop battery from a third-party seller, Lenoge Technology HK Ltd., on Amazon's marketplace. 

The ruling deals a major blow to Amazon, which has for years successfully fought off lawsuits that try to place liability on the company for faulty products sold through its site that cause injury and property damage. 

"Consumers across the nation will feel the impact of this," said Jeremy Robinson, an attorney for Bolger. 

An Amazon spokesperson told CNBC in a statement issued on Friday: "The court's decision was wrongly decided and is contrary to well-established law in California and around the country that service providers are not liable for third party products they do not make or sell. We will appeal this decision."

Amazon's sprawling marketplace, which hosts millions of third-party sellers, now accounts for approximately 60% of the company's e-commerce sales. While the marketplace has helped Amazon bring in record revenue, it has also proven to host counterfeit, unsafe and even expired goods. The company has previously said it invests hundreds of millions of dollars per year to ensure products sold are safe and compliant.

Amazon has long maintained it's only the conduit between buyers and sellers on its marketplace and that it's not involved in the sourcing or distribution of products sold by third-party sellers, removing it from liability. It's been a successful defense for Amazon in the past, including in a 2018 case concerning the purchase of a faulty hoverboard that exploded and burned down an Amazon shopper's house in Tennessee. 

The company still faces several ongoing product liability cases in state and federal courts across the country. 

In Bolger's case, the court ruled that Amazon placed itself in "the chain of distribution" of the faulty laptop battery by, among other things, storing the product in its warehouses, receiving payment and shipping the product, as well as setting "the terms of its relationship" with the third-party seller and demanding "substantial fees on each purchase."

"Whatever term we use to describe Amazon's role, be it 'retailer,' 'distributor,' or merely 'facilitator,' it was pivotal in bringing the product here to the consumer," the court said. "Under established principles of strict liability, Amazon should be held liable if a product sold through its website turns out to be defective."

The court said Amazon also can't be shielded from liability through Section 230 of the Communications Decency Act, a law from the 1990s that protects online platforms from being held responsible for content their users post on their sites.

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