Seller or not: How a circuit split leaves Amazon’s liability for defective products sold on its platform in question.

April 3, 2020

            Section 230 of the Communication Decency Act provides immunity from liability for providers and users of an “interactive computer service” who publish information provided by third-party users. District courts have been split on whether e-commerce sites such as Amazon are considered sellers. A seller designation determines if those sites are shielded from liability under Section 230 when it comes to the product liability suits for items bought on the site. Without clear directive from The Supreme Court or legislative guidance, companies such as Amazon and eBay will continue to be at the whim of federal court judges and state product liability laws. Eventually, these companies are going to have to change the way the public conducts business on their sites. These changes will not only affect the seller that operates multimillion-dollar businesses, but it will also affect consumers who rely on these sites for everything from household goods to medical supplies.

            People understand that when you purchase on a site like eBay, you know that eBay is not selling the product. Instead, it’s sold by a third-party seller using eBay’s platform to connect with consumers. However, sites such as Amazon makes it less clear if a purchaser is buying directly from Amazon or a third-party seller by sometime fulfilling orders for third parties. Although Amazon stands by its claim that the site informs purchasers when a purchase is being sold by Amazon and when it is not, the courts have not been very clear on when they consider Amazon to be a seller and when it’s not.

            Where should the responsibility for the products sold on e-commerce sites rest? Should Amazon and companies like it be subjected to liability for defective products sold on their platform by others? How should Amazon be viewed? Is it a platform for vendors, or a distributor of goods? eBay’s business model makes it easy to answer this question.  Amazon, on the other hand, does not, its business model leaves open the possibility that it is not only a platform for sellers but also a distributor of goods. The company sometimes performs operations that can be considered the job of the seller when it facilitates orders for sellers on the web platform. Some of these tasks include packaging, shipping, warehousing, and the handling of the revenue while charging the seller a fee for this process.   

            Determining when to treat an online marketplace as a seller or not is not an easy task. This is a critical issue when the protection section 230 is raised. During a liability suit, an entire defense may rest on this determination. If the marketplace is not a seller, then it is protected by the act; conversely, if found to be a seller, its liability will not be shielded by 230.  Similar to how content websites are liable if considered a publisher or speaker, a website can be held liable when the marketplace is directly involved with selling. State courts are not unanimous in these determinations, and without the same precedent and guidance that has been provided for section 230 when it comes to content websites and blogs, the courts continue to rule without any uniformity.

            When faced with the question of “should Amazon be considered a seller” during product liability suits, several lower district courts have determined that it was not. In Fox v., Inc. in the 6thCircuit ruled that Amazon was not a seller based on the meaning of the term as per that jurisdiction’s product liability laws. In Eberhart v., Inc. the Southern District of New York dismissed the liability claims against Amazon finding that it was not a “seller” of the defective products in question as it was not within the chain of distribution. Not only did both of these court rule in favor of Amazon, but the 6thCircuit’s Court of Appeals affirmed the lower court ruling. That is why the recent Court of Appeals decisions in other districts are so alarming.  

            The Third Circuit’s ruling in Oberdorf v., Inc.held that Amazon is a “seller” of goods under Pennsylvania products liability law. Therefore section 230 cannot shield it from liability for injuries sustained by customers from products found to be defection after purchased from the site. The court stated, “In this case, Amazon’s role extends beyond that of [a] sales agent, who in exchange for a commission merely accepted orders and arranged for product shipments. Amazon not only accepts orders and arranges for product shipments, but it also exerts substantial market control over product sales by restricting product pricing, customer service, and communications with customers.” As the third court in the current split to deem Amazon a seller, the Oberdorf decision is major. The decision is being appealed, and Amazon plans to take this to the highest court if necessary.  

            As of now, the case has not made its way to The Supreme Court, however, this is an issue that The Court should want to rule on. Their opinion will provide the uniformity and clarity necessary for this issue. Although product liability laws are state issues, guidance from The Supreme Court can help bring cohesiveness to lower courts. The internet has brought the world closer together. While states deserve autonomy over their laws, the culpability of “sellers” in product liability cases should not vary based on the jurisdiction of the consumer. 

Donte Jones