Platform liability for unsafe products sold by third party sellers
Some of the favourite expressions of online platform providers around the world are that they ‘only offer a platform’ and are ‘in no way responsible for statements made or goods offered by third parties on their platform’. However, recent US case law held Amazon liable for physical harm caused by goods sold by a third party on their platform. This newsletter provides an overview of this case law and looks into the question of whether the EU Product Liability Directive allows a similar approach.
Evolution in the US
In the US, support for the immunity of third-party statements on their platforms follows from the (in)famous Section 230 Communications Decency Act (CDA) stating that ‘No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider’. A federal rule providing immunity for damage caused by goods offered by third parties on a platform is not available. For a long time, US courts have recognised that their state rules on product liability do not hold platform operators liable for damage caused by goods sold by third parties through their platforms.[1] However, a recent case in the states of Pennsylvania and California has led to a different conclusion. In Oberdorf v. Amazon LLC,[2] a Pennsylvanian Court of Appeal held that Amazon was to be considered a seller within the meaning of § 402A of the Second Restatement of Torts and that under Pennsylvanian law it could be held liable for physical harm caused to a dog owner (Ms Oberdorf) by a defective leash for a dog she bought on Amazon, even though the leash was sold by a third-party vendor, who shipped it directly to the customer Oberdorf. Regarding Amazon’s defense based on Section 230 CDA, the Court found that to the extent that the claims were based on Amazon’s failure to provide or edit adequate warnings regarding the use of the dog collar, this activity fell under the editorial functions of the publisher, so Section 230 applied. However, insofar as the claims were based on allegations relating to sales, inspections, marketing, distribution, failure to test, or design claims, they pertained to Amazon’s direct role in the sales and distribution processes and were outside the scope of Section 230 CDA.
In Bolger v. Amazon.com LLC,[3] a Californian Court of Appeal reached a similar outcome in a case concerning an exploding laptop battery, sold by a third party on its platform. Unlike the seller in Oberdorf, the seller in Bolger shipped through Amazon’s Fulfilled by Amazon service, which stores and ships merchandise for third-party retailers. The Court rejected Amazon’s assertion that it was merely a service provider with no control over the product and found that Section 230 CDA did not apply because Amazon’s liability was based on its own conduct and not on the content of the seller’s product listing. The Court further held that Amazon fulfilled the conditions for the application of California’s strict liability doctrine, since it was ‘'an integral part of the overall producing and marketing enterprise'; it may be `the only member of that enterprise reasonably available to the injured plaintiff,' and it was in the best position to ensure product safety since it could, ‘adjust the costs of liability in the course of [its] continuing business relationship with other participants in the overall manufacture and marketing enterprise’.
The decision in Bolger was confirmed and extended in Loomis v. Amazon.com LLC,[4] concerning physical harm caused by a hoverboard that was sold on Amazon by a third-party seller who did not make use of Amazon’s Fulfilled by Amazon service, just like the seller in the Oberdorf case.
In Loomis, the Court held that not only the conditions of the vertical chain of were fulfilled, but also those of a second and alternative theory for strict liability: the stream of commerce approach or market enterprise theory. Firstly, Amazon ‘received a direct financial benefit in the form of fees, including a monthly subscription fee and a 15 percent referral fee, from the sale of the product’. Secondly, it did not present any evidence for not having played a role in the creation of a market for TurnUpUp hoverboards. Amazon had no information about other channels TurnUpUp used to sell its hoverboards on, while Amazon itself made a profit of $110,645.92 from the sale of TurnUpUp hoverboards between September 14, 2015 and December 16, 2015. Finally, ‘Amazon had substantial ability to influence the manufacturing or distribution process through its ability to require safety certification, indemnification, and insurance before it agrees to list any product’.
Room for a similar approach in the EU?
Pursuant to Article 3 of Product Liability Directive the concept ‘producer’ refers to ‘the manufacturer of a finished product, the producer of any raw material or the manufacturer of a component part and any person who, by putting his name, trade mark or other distinguishing feature on the product presents himself as its producer’. A German court accepted that for the application of this definition, it is sufficient that a person mentions their name and trade mark on the packaging of the product. This interpretation could allow Amazon to be considered the producer of the product when the product is shipped in Amazon packaging.[5]
Article 3 Product liability Directive continues that ‘without prejudice to the liability of the producer, any person who imports into the Community a product for sale, hire, leasing or any form of distribution in the course of his business shall be deemed to be a producer within the meaning of this Directive and shall be responsible as a producer.’ Treating Amazon as an importer of a product sold by a third party on its website when the seller ships the product directly to the customer appears to be difficult. There seems to be some extra leeway when a seller from outside the EU sends the products to an Amazon service center, from where the product will be shipped to the consumer.
Finally, Article 3 Product Liability Directive provides that ‘where the producer of the product cannot be identified, each supplier of the product shall be treated as its producer unless he informs the injured person, within a reasonable time, of the identity of the producer or of the person who supplied him with the product. The same shall apply, in the case of an imported product, if this product does not indicate the identity of the importer referred to in paragraph 2, even if the name of the producer is indicated’. The underlying idea (ration legis) of this provision is that a person who is known to the consumer and is able to trace the producer, or at the least another person who is closer to the producer than the person known to the consumer, should be considered as the producer unless he informs the consumer of the actual producer, within the meaning of the Product Liability Directive. Applying this provision to Amazon seems to be perfectly in line with its ratio legis.
Article 15 of the E-commerce directive does not shield Amazon from this liability since the preamble of this Directive explicitly provides that it is ‘without prejudice to the level of protection for, in particular, public health and consumer interests, as established by Community acts; amongst others, (…) Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions concerning liability for defective products’.[6]
[1] See Erie Ins. Co. v. Amazon.com, Inc. (4th Cir. 2019) 925 F.3d 135, 140 (Maryland); Stiner v. Amazon.com, Inc. (Ohio 2020) 2020-Ohio-4632; Fox v.Amazon.com, Inc. (6th Cir. 2019) 930 F.3d 415, 425 (Tennessee); Garber v. Amazon.com, Inc. (N.D.Ill. 2019) 380 F.Supp.3d 766, 779 (Illinois); State Farm Fire and Cas. Co. v. Amazon.com, Inc. (W.D.Wis. 2019) 390 F.Supp.3d 964 (Wisconsin), all cited in Loomis. v. Amazon.com LLC, (2021) 63 Cal.App.5th 466.
[2] Oberdorf v. Amazon.com Inc., - 930 F.3d 136 (3d Cir. 2019).
[3] Bolger v. Amazon.com LLC, (2020) 53 Cal.App.5th 431.
[4] Loomis v. Amazon.com LLC, (2021) 63 Cal.App.5th 466.
[5] Higher Regional Court Düsseldorf (Sept. 22, 2000) 22 U 208/99, BeckRS 2000, 30133008. See Busch, Christoph, Rethinking Product Liability Rules for Online Marketplaces: A Comparative Perspective (February 10, 2021). 2021 Consumer Law Scholars Conference in Boston (March 4-5, 2021), Available at SSRN: https://ssrn.com/abstract=3784466 or http://dx.doi.org/10.2139/ssrn.3784466.
[6] For further reasons why Art. 15(2) E-commerce Directive does not provide a safe harbor for product liability, see Busch, cited above..