Trial Magazine

Online stores are no longer just a nexus between distant buyers and sellers. They are the norm. E-commerce accounts for over 15% of all retail in the United States¹ and nearly 19% worldwide.² And its market share is rising. Amazon is outpacing Walmart as the top retailer in the country by total sales.³

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Unlike brick-and-mortar retailers that also sell on their websites, e-commerce companies often position themselves as part of the gig economy and claim to be a technological intermediary between the true seller and the consumer.

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Unlike traditional brick-and-mortar retailers that also sell on their websites, e-commerce companies often position themselves as part of the gig economy. Just as Lyft and Uber attempt to evade vicarious liability by claiming to connect passengers with “independent contractor” drivers, these companies claim to be a technological intermediary between the true seller and the consumer. But that assertion ignores the realities of the modern retail economy. A recent FTC antitrust lawsuit alleges that Amazon monopolizes the online superstore market, and, in turn, dominates the entire retail industry.⁴

The ‘Marketplace’ Argument

An e-commerce company’s likely first line of defense is claiming that it is not a seller or distributor under the law, but rather a “marketplace” that connects sellers and consumers. For example, Amazon argues that it cannot be a seller under products liability law because it never holds title to the products. Unlike most brick-and-mortar retailers, Amazon and many web-based stores do not purchase products from a wholesaler and resell them. Instead, Amazon takes a commission on every sale, which it characterizes as a “service” that connects buyer and seller, like a broker. Amazon often never takes possession of the product. When it does for storage and shipping purposes via its “Fulfillment by Amazon” (FBA) program, the company argues it is more akin to a shipper or logistics company than actual retail.⁵

Amazon has succeeded with these arguments in some states. For example, in Erie Insurance Co. v. Amazon.com, Inc., the Fourth Circuit concluded that the ordinary meaning of “seller” requires a transfer of ownership and title to property for a certain price.⁶ It found that Amazon’s services were akin to a shipping company delivering the product to a customer. Similarly, in Eberhart v. Amazon.com, Inc., the Southern District of New York found that Amazon’s not taking title to the product was dispositive on whether it was a seller or distributor.⁷ The court likened Amazon more to a service provider between a seller and buyer.

The argument is, in a nutshell, if you never own it and never have it, how can you sell it? But what once may have seemed logical about traditional retail is increasingly specious in a digital world. To overcome these defense arguments, you need to delve into the entire transaction, the company’s role in the retail industry, and the company’s detailed assurances of safety protocols that go well beyond that of a marketplace, logistics company, or intermediary.

The Transaction Taken as a Whole

An e-commerce company’s claim that it is a marketplace or “service provider” falls flat when considering the entire transaction and the company’s paramount control over it. The Restatement (Third) of Torts defines “one who sells or otherwise distributes.”⁸ A “seller,” it says, is one who transfers ownership of a product. A “distributor” is someone who “provides the product to another either for use or consumption or as a preliminary step leading to ultimate use or consumption.”⁹ Finally, under §20(c), “one also sells or otherwise distributes a product when, in a commercial transaction, one provides a combination of products and services and either the transaction taken as a whole, or the product component thereof, satisfies the criteria in Subsection (a) or (b).”¹⁰

Comment (a) to the restatement notes that although title does not pass in lease transactions, the same policy objectives apply, and “courts have extended strict products liability to a wide range of nonsale, nonlease transactions.”¹¹ States that include “lease,” “bailment,” or “consignment” in their definitions of “seller” are inherently broader than “transfer of title.” For example, Amazon’s home state of Washington includes “lease” and “bailment” in its definition, and it defines “product seller” as “any person or entity that is engaged in the business of selling products, whether the sale is for resale, or for use or consumption.”¹²

However, an e-commerce defendant may point to Comment (g) of the restatement: “Persons assisting or providing services to product distributors, while indirectly facilitating the commercial distribution of products, are not subject to liability under the rules of this Restatement.”¹³ Accordingly, “commercial firms engaged in advertising products are outside the rules of this Restatement,” and “sales personnel and commercial auctioneers are also outside the rules of this Restatement.”¹⁴

Are e-commerce companies merely an advertiser, broker, or shipper? When you look at the restatement’s “transaction taken as a whole” wording, they are clearly more. For instance, Amazon calls itself a “store.” It is registered in its home state of Washington as a retailer.¹⁵ The company regularly refers to itself as a store in reference to product regulatory compliance,¹⁶ advertising to “partner sellers,”¹⁷ and reassurance to customers about product safety.¹⁸ Like most national retailers, it has its own generic brand of products—Amazon Basics.¹⁹

Amazon not only describes itself as a store, it also takes on the roles of traditional retailers. It chooses what products can be listed; processes refunds and returns; provides replacement items; communicates with customers about the product; monitors customer reviews and feedback; can modify or suspend product listings or sales; and can choose whether and how to dispose of product units. The company calculates, charges, and remits sales tax. Its Fulfillment by Amazon “lets you outsource order fulfillment to Amazon,”²⁰ meaning Amazon stores products at its warehouses and delivers them to the consumer in Amazon packaging.

Under Amazon’s “Services Business Solutions Agreement,” the online retailer requires that partner sellers abide by preset refund policies and give Amazon the sole discretion to process refunds “for the benefit of customers.”²¹ Amazon is responsible for nearly all customer service issues and retains discretion to dispose of returned items.²² The company mandates a “seller code of conduct,” requires proof of regulatory compliance, restricts or preapproves certain products, and enforces product recall notifications.²³ In other words, Amazon controls the entire transaction.

In Bolger v. Amazon.com, LLC, the plaintiff purchased a laptop battery on Amazon that ultimately exploded several months later, causing severe burns.²⁴ In reversing summary judgment for Amazon, the California appellate court highlighted the company’s traditional retail functions: It placed itself between the manufacturer/seller and customer, accepted possession of the product, stored the product in its warehouse, attracted the customer to its website, provided a product listing for the battery seller’s product, received payment for the product, and shipped the product in Amazon packaging.²⁵ Amazon also set the terms of its relationship with the manufacturer/seller, controlled its product listing, limited the seller’s access to customer information, forced the seller to communicate with customers through Amazon’s website, demanded indemnification, and required substantial fees on each purchase.²⁶

Recently, in Packard v. Amazon.com, Inc., the Louisiana Supreme Court held Amazon to be a seller.²⁷ The plaintiff was severely burned and died as a result of a defective battery charger purchased on Amazon. On certified questions, the Louisiana Supreme Court likened Amazon to a domestic distributor: “An operator of an online marketplace who, as described in the certified question, ‘had physical custody of the product in its distribution warehouse’ and ‘controlled the process of the transaction and delivery’ necessary to convey ownership and possession of the product to the buyer can perform a similar role.”²⁸ This is because “the operator’s involvement can form a substantial and material part of the transaction.”²⁹ The Packard ruling rejects Amazon’s attempt to liken its involvement in the transaction to mere shippers: “While a delivery service [like USPS] may have temporary possession or transient control of a product, that is not sufficient to subject the service provider to liability under the Act.”³⁰

In the latest and most far-reaching blow to Amazon’s attempts to avoid products liability, on July 30, the Consumer Product Safety Commission (CPSC) issued a “Decision and Order” against Amazon, finding that Amazon is a distributor of products under the Consumer Product Safety Act (CPSA) and is therefore legally responsible for recalls.³¹ The CPSC applied the order to more than 400,000 products sold by third-party sellers via FBA that were defective or failed to meet federal standards.³²

The Decision and Order explains that the CPSA defines “distributor” as “a person to whom a consumer product is delivered or sold for purposes of distribution in commerce.”³³ “Distribution in commerce” means “to sell in commerce, to introduce or deliver for introduction into commerce, or to hold for sale or distribution after introduction into commerce.”³⁴ The CPSC points out that “Amazon retains significant control over products sold through the [FBA] program and is the point of contact for the consumer.”³⁵ Specifically, “Amazon keeps the products in its fulfillment centers pending sale, [and] Amazon charges monthly and long-term storage fees to its [Fulfillment] by Amazon [FBA] participants.”³⁶

Unlike delivery companies or direct seller-to-buyer transactions, “Amazon may combine multiple products ordered by a customer from different [FBA] participants in one shipment from Amazon.”³⁷ Citing Amazon’s “far-reaching control” of its FBA program, the CPSC said that “Amazon fit squarely within the definition of [a] distributor in the CPSA when it operated its [FBA] program for the [products] at issue in this case.”³⁸

The CPSC rejects Amazon’s familiar arguments. It does not matter under the CPSA that Amazon did not hold title to sell the products. Amazon is not a “third-party logistics provider,” which is defined under federal law as “a person who solely receives, holds, or otherwise transports a consumer product.”³⁹ Unlike a logistics company or marketplace, Amazon controls or has the right to control virtually every part of the transaction. It controls the product listing, purchase, storage, shipping, communications, returns, warnings to consumers, and disposition of defective inventory.

Role in the Market and Public Policy

In most states, products liability law is rooted in the public policy of who should bear the cost of compensating victims of defective products. The greater the role in manufacturing and distributing the product, typically the greater the responsibility.⁴⁰ As courts are beginning to recognize, Amazon not only controls transactions, it also enables and controls an entire subsection of the retail economy. The company wields unparalleled influence in the downstream distribution to consumers and upstream demands for product safety.

The Bolger court reasoned that regardless of any historical or technical terminology for “seller” or “distributor,” Amazon was the true giant in the chain of distribution.⁴¹ It was an essential component connecting the product to the consumer. Amazon was the only enterprise reasonably available to compensate consumers, played a substantial role in ensuring products listed on the site were safe, and, in many scenarios, was the only party able to exert pressure upstream to enhance safety. Amazon’s scope went far beyond “facilitating the commercial distribution of products.”⁴²

Similarly, in State Farm Fire & Casualty Co. v. Amazon.com, Inc., the court held that Amazon is a seller under Wisconsin’s strict liability statute primarily because it is an essential nexus between the consumer and a foreign manufacturer, and it injects the products into the stream of commerce.⁴³ Amazon’s transfer of title argument also failed, given the level of control that Amazon exerts over its online store, distribution of foreign products in the American marketplace, and the risk of dangerous products.⁴⁴

The common theme of these cases is the modern economy. Anyone with a computer can purchase products overseas and distribute them nationwide for a profit. Amazon not only allows fledgling companies to inject unreliable products into the stream of commerce, it encourages them to do so and provides the tools to do it.

Amazon advertises to sellers its unmatched distribution scale. Amazon’s “Product Opportunity Explorer” offers manufacturers and partner sellers a way to “understand customer search and purchase behavior” to identify new products to sell.⁴⁵ In its blog post “7 Ways to Make Money and Scale Your Business With Amazon,” the online retailer advises fledgling brands on how to resell products for a profit, source a wholesaler or manufacturer, and dropship⁴⁶ items to “get products into the hands of as many customers as possible.”⁴⁷

Amazon also advises sellers of restricted products—that is, items Amazon must approve for sale before sellers can list them, like alcohol, cosmetics, fine art, hazmat goods, and lithium batteries—that sellers of those products can make “increased sales and profits” due to less competition.⁴⁸ The FBA is now part of “Supply Chain by Amazon,” a fully automated “end to end” supply chain service from manufacturer to customer.⁴⁹

Assurances of Safety

A mere marketplace or delivery company does not vet and vouch for products. When it comes to boosting sales—rather than avoiding products liability—Amazon does not shy away from its involvement in product safety. Amazon posted an article to its company news page in 2019 “in response,” it says, “to a Wall Street Journal story about the safety of products offered in our store.”⁵⁰ In that article, Amazon boasts its “industry-leading safety and compliance program.”⁵¹ That program allegedly included both regulatory (such as CPSC) standards and internal proprietary technology, as well as vetting before and after products are listed for sale. The purpose of these standards is “to earn and maintain your trust,” the article claims.⁵² Amazon goes on to state that “in 2018 alone, we invested over $400 million to protect our store and our customers.”⁵³ These are hardly the proclamations of a mere intermediary.

Along these lines, the Packard court prescribed a duty of reasonable care based on Amazon’s heavily advertised product safety protocols. Amazon uses multiple tools to scan customer reviews and feedback to “identify and prevent unsafe or non-compliant products from being listed.”⁵⁴ The company controls the point of sale—it can request documentation about the product, remove the product, terminate the seller’s privileges, and notify purchasers about safety concerns.⁵⁵ Even though Amazon voluntarily undertook these procedures, when consumers rely on Amazon’s assurances, they can bring a negligent undertaking claim.

Similarly, courts have held the online retailer liable as a product seller for misrepresentations on its site.⁵⁶ In one case declining to hold Amazon liable as more than a facilitator, the court conceded that Amazon might be a product seller if it took affirmative steps to control the product beyond what is specified in its seller services agreements, including interactions with consumers.⁵⁷ Thus, an online store labeling a product “Best Seller,” “Amazon’s Choice,” or otherwise using its discretion to endorse a product is an affirmative act that evidences more than mere facilitation or delivery.⁵⁸

These types of broad assurances of safety are a readily available starting point to holding Amazon and similar e-commerce sites liable. If nothing else, they demonstrate far more involvement than an intermediary or facilitator. But Amazon’s participation in the specific transaction is even more compelling, particularly when the company attempts to transfer consumer trust in Amazon to partner sellers and their products.

Other Online Stores

There is far less case law available challenging the seller status of other online stores, most likely because they operate their businesses differently and litigate cases differently. Big box retailers and drugstores often cannot use Amazon’s arguments because they purchase and store items for resale—in store or online—or they brand the products. The website is merely an extension of their traditional business model.

However, a portion of Walmart online sales may be an exception. Like Amazon, Walmart claims to offer a marketplace to connect third-party sellers to consumers.⁵⁹ The company has successfully argued it is not a “dealer” under Louisiana tax law by making arguments similar to those Amazon has made.⁶⁰

Although Walmart has not litigated products liability issues as extensively as Amazon, the same arguments apply. Walmart claims to vet and monitor products to “ensure sellers can give the same high-quality experiences to all our Walmart.com customers.”⁶¹ Walmart says its “Walmart Fulfillment Services” allows the company “to store inventory, ship orders, and manage returns.”⁶² This level of control is easily distinguishable from sites that passively connect buyers and sellers.

For example, sites like eBay may have better arguments than Amazon, depending on the transaction. The restatement excludes auctioneers. While eBay has entered the retail market—for example with “eBay Refurbished” products—and is a frequent point of sale for new items, it has historically acted as a bidding forum and connection point between individual buyers and sellers. Sites like eBay may be more akin to Craigslist, where consumers know they are purchasing from individual sellers in a buyer beware environment, rather than a retail website strictly controlled by the retailer.

To overcome arguments against liability that Amazon and similar e-commerce companies might pose, plaintiff attorneys should conduct discovery on e-commerce companies’ role in every part of the transaction, from product listing and labels to delivery and returns. Obtain all data about how the company conducts business with the seller to show the level of control the e-commerce company has over the whole transaction. This will bolster the case for these companies’ responsibility as more than marketplaces. Amazon’s control and role in the retail industry has changed substantially since the initial cases decided in its favor. Challenge old assumptions with new facts. These cases are not just about a single transaction, but the retail economy itself.

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Andrew Ackley is a senior partner at Stritmatter Kessler Koehler Moore in Seattle and can be reached at andrew@stritmatter.com.

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Notes

1. Press Release, U.S. Census Bureau, Quarterly Retail E-Commerce Sales (Aug. 19, 2024), https://www.census.gov/retail/ecommerce.html.
2. Daniela Coppola, E-commerce As Share of Total Retail Sales Worldwide 2021–2027, Statista (May 22, 2024), https://www.statista.com/statistics/534123/e-commerce-share-of-retail-sales-worldwide/.
3. Jason Del Ray, Amazon Will Soon Top Walmart in Overall Sales but It Still Lags the Brick-and-Mortar Retailer in One Crucial Area, Fortune (Feb. 5, 2024), https://finance.yahoo.com/news/amazon-soon-top-walmart-overall-110000422.html.
4. Complaint, FTC v. Amazon.com, Inc., No. 2:23-cv-01495 (W.D. Wash. Sept. 16, 2023).
5. See Amazon Services Business Solutions Agreement (March 2020), https://m.media-amazon.com/images/G/31/rainier/help/BSA_IN_Mar_2020._CB1198675309_.pdf.
6. Erie Ins. Co. v. Amazon.com, Inc., 925 F.3d 135, 141 (4th Cir. 2019).
7. Eberhart v. Amazon.com, Inc., 325 F. Supp. 3d 393, 395 (S.D.N.Y. 2018).
8. Restatement (Third) of Torts: Prod. Liab. §20 (Am. Law Inst. 1998).
9. Id.
10. Id.
11. Id.
12. Wash. Rev. Code Ann. §7.72.010(1) (West 1991).
13. See Restatement (Third) of Torts: Prod. Liab. §20.
14. Id.
15. See Wash. State Dep’t of Revenue, Business Lookup, https://secure.dor.wa.gov/gteunauth/_/#2.
16. Lola Okusami, Simplify Product Safety With the Manage Your Compliance Dashboard, Amazon.com (Aug. 3, 2022), https://sell.amazon.com/blog/manage-your-compliance.
17. Daisy Quaker, 7 Ways to Make Money and Scale Your Business With Amazon, Amazon.com (Mar. 3, 2023), https://sell.amazon.com/blog/make-money-on-amazon.
18. Product Safety and Compliance in Our Store, Amazon.com (Aug. 23, 2019), https://www.aboutamazon.com/news/company-news/product-safety-and-compliance-in-our-store.
19. Amazon would automatically be considered a manufacturer of its “Amazon Basics” branded products in its home state of Washington. See Wash. Rev. Code Ann. §7.72.010(2); Wash. Rev. Code Ann. §7.72.040(2)(e) (West 1981); Johnson v. Recreational Equip., Inc., 247 P.3d 18, 23 (Wash. Ct. App. 2011).
20. Amazon FBA: Fulfillment Services for Your Ecommerce Business, Amazon.com, https://sell.amazon.com/fulfillment-by-amazon.
21. Id.
22. See id.
23. Id.
24. Bolger v. Amazon.com, LLC, 53 Cal. App. 5th 431, 437 (Cal. App. Dep’t Super. Ct. 2020).
25. Id. at 438.
26. Id.
27. Pickard v. Amazon.com, Inc., 387 So. 3d 515, 523 (La. 2024).
28. Id. at 520.
29. Id.
30. Id. at 522.
31. Press Release, U.S. Consumer Product Safety Commission, CPSC Finds Amazon Responsible Under Federal Safety Law for Hazardous Products Sold by Third-Party Sellers on Amazon.com (July 30, 2024), https://tinyurl.com/y5xwfx6j.
32. Id.
33. Id.
34. 15 U.S.C. §2052(a)(7) (2008); In the Matter of Amazon.com, Inc., No. 21-2, 6 (C.P.S.C. July 29, 2024).
35. Id. at 7.
36. Id. at 8.
37. Id.
38. Id. at 26.
39. Id. at 7 (emphasis added).
40. See, e.g., Restatement (Third) of Torts: Prod. Liab. §20 (noting “in these areas into which strict products liability is expanding, courts frequently consider public policy in making their decisions”).
41. Bolger, 53 Cal. App. 5th at 456–60.
42. Id. at 459.
43. State Farm Fire & Cas. Co. v. Amazon.com, Inc., 390 F. Supp. 3d 964, 972–73 (W.D. Wis. 2019).
44. See also State Farm Fire & Cas. Co. v. Amazon.com Servs., Inc., 137 N.Y.S.3d 884, 889 (N.Y. App. Div. 2020).
45. Lola Okusami, Get Product Ideas With Product Opportunity Explorer, Amazon.com (Apr. 10, 2023), https://sell.amazon.com/blog/product-opportunity-explorer.
46. “Dropshipping” is an order fulfillment option that allows e-commerce businesses to outsource the processes of procuring, storing, and shipping products to a third party—typically a supplier. What Is Dropshipping? How Does It Work in 2024?, Amazon.com, https://sell.amazon.com/learn/what-is-dropshipping.
47. Quaker, supra note 17; Daisy Quaker, How to Find Wholesalers and Suppliers for Your Business, Amazon.com (Oct. 27, 2023), https://sell.amazon.com/blog/how-to-find-wholesalers.
48. Amazon Restricted Products—Complete Guide for Sellers, Amazon.com (Apr. 15, 2024), https://www.sellerassistant.app/blog/amazon-restricted-products-complete-guide-for-sellers.
49. End-to-End Supply Chain Management or Multiple Sales Channels, Amazon.com, https://sell.amazon.com/programs/supply-chain?ref_=sdus_fba_sba.
50. Id.
51. Product Safety and Compliance in Our Store, supra note 18.
52. Id.
53. Id.
54. Pickard, 387 So. 3d at 525.
55. Id.
56. See, e.g., Great N. Ins. Co. v. Amazon.com, Inc., 2019 WL 3935038, at *3 (N.D. Ill. Aug. 20, 2019).
57. Allstate New Jersey Ins. Co. v. Amazon.com, Inc., 2018 WL 3546197, at *11 (D.N.J. July 24, 2018).
58. See id. at 11.
59. See id.
60. See Normand v. Wal-Mart.com USA, LLC, 340 So. 3d 615, 632–33 (La. 2020). But see Amazon Servs., LLC v. South Carolina Dep’t of Rev., 898 S.E.2d 194, 201 (S.C. Ct. App. 2024) (holding Amazon to be “in the business of selling tangible personal property at retail” and a “seller” for tax purposes).
61. Marketplace Sellers on Walmart, Walmart, https://www.walmart.com/help/article/marketplace-sellers-on-walmart/33258c6228d94acbbcbdaf6b7b0b616b.
62. Walmart Marketplace, Walmart, https://marketplace.walmart.com/.