Split Emerges over Products Liability for Online Markets

In a decision that highlights an emerging split in whether online marketplaces are liable for products sold by third parties, a state supreme court has held that Amazon is not liable for products sold by a third-party vendor on its website. Meanwhile, another line of cases has come to the opposite conclusion. Given this uncertainty, ABA Litigation Section leaders suggest that online marketplaces may respond by imposing stricter controls over products sold on their platforms.

State Supreme Court Concludes that Amazon Is Not the Seller of the Product

In Stiner v. Amazon.com, Inc., a teenager passed away after ingesting a fatal dose of a caffeine powder called “Hard Rhino,” which he obtained from a friend. The friend had bought it from a third-party vendor, Tenkoris, on Amazon’s website. The teenager’s family sued Amazon for product liability and negligence under the theory that Amazon had supplied “Hard Rhino”. The trial court found that Amazon was not liable as a supplier, and granted summary judgment in favor of Amazon. The intermediate appellate court affirmed the dismissal.

On appeal to the Supreme Court of Ohio, the plaintiff argued that Amazon was a supplier under Ohio’s Products Liability Act, which defines a “supplier” as any entity that “sells, distributes, leases, prepares, blends, labels, or otherwise participates in the placing of a product in the stream of commerce.” The court reasoned that the Act did not intend to impose liability on persons without sufficient control over the product, as it excludes persons that only act in a “financial capacity” from the definition of supplier. Because Tenkoris was the company that placed the product on Amazon’s site, wrote the product description, and sold, fulfilled, packaged, and shipped the product directly to customers, the court concluded that Amazon was not a supplier that placed the product in the stream of commerce.

The court likewise rejected plaintiff’s arguments that Amazon should be held liable because of the control it exercised over third-party vendors. While Amazon “prevent[ed] sellers from contacting customers”, “reserve[d] the right to alter the content of product descriptions”, and “impose[d] restrictions on pricing”, that control was insufficient to qualify it as a seller. The court also concluded that the public policy objective of promoting product safety would not be furthered by imposing liability, as Amazon had no relationship with the manufacturer and no role in labeling or packaging the product. Accordingly, the court affirmed the summary judgment in favor of Amazon.

Courts Split on Whether Amazon is a Seller in the Stream of Commerce

Other courts have agreed that Amazon lack sufficient control over the product to be held liable. For example, in Fox v. Amazon, Inc., the U.S. Court of Appeals for the Sixth Circuit held that even though the company possessed the hoverboard at issue and shipped it from its location, Amazon also never decided to sell the product nor made any representations about it.

By contrast, other courts have found that an online marketplace can be held liable for a defective product when it possesses the product and sells it to the customer. In Bolger v. Amazon.com, LLC, a California appellate court found that the online marketplace was a “seller” for the purposes of products liability where it stocked and shipped the product to the customer on behalf of a third-party vendor. The U.S. District Court for the Southern District of Texas came to the same conclusion in McMillan v. Amazon.com, Inc. That case was appealed to the U.S. Court of Appeals for the Fifth Circuit, which certified the question to the Supreme Court of Texas. As of press time, the Supreme Court of Texas has not issued a ruling on the question.   

Section Leaders Suggest Changes to Limit Exposure

Litigation Section leaders predict a change in product liability jurisprudence that considers the consumers’ knowledge of the product. “You can’t divorce product liability from the notion of some level of responsibility on the consumer to educate himself or herself. We won’t necessarily see courts placing this burden on the consumer, but we may see a reasonable person standard develop over time, by which defendants could demonstrate that the consumer knew or should have known that they were buying from a third party and not Amazon,” says Tonya G. Newman, Chicago, IL, cochair of the Section’s Products Liability Litigation Committee.

Section leaders also suggest some proactive strategies that companies may enact to reduce their exposure. For example, online marketplaces “should consider imposing stricter controls on the products they sell on their website and might consider declining altogether to sell consumable products and other ingestibles that are not regulated by the FDA,” advises Michelle Molinaro Burke, Morristown, NJ, cochair of the Section’s Products Liability Litigation Committee. Another strategy is to include a “conspicuous disclaimer that disclaims liability” and clearly “informs consumers who they are buying from,” adds Newman.