Businesses: Be careful in the third-party marketplace

| Jan 11, 2021 | business litigation

The digital world of commerce and business grows every day. And over the last few years, third-party marketplaces that market catalogues of products from many different sellers have increased in popularity and use. Many businesses large and small often see these catalogues as an advantage to get their product out to consumers.

Amazon is the epitome of this, as they allow competitors and small businesses to sell their products through their site. However, this model seems to be putting Amazon in a tough spot as they grapple with legal claims of liability.

Court finds Amazon liable for third-party products

Baker & Associates is not involved in this case, but business owners must be aware of the lawsuit’s developments – and what they could mean for their own business.

In a monumental ruling, California’s Fourth District Court of Appeals determined that Amazon could be held liable for defective products from third-party sellers.

In this recent case, the plaintiff claimed she bought a replacement laptop battery through Amazon, though the battery was from a third-party seller under the name “E-Life.” The plaintiff stated the battery exploded and caused serious burns when she used the computer.

When she filed a claim against Amazon, the online retailer reported it did not distribute, manufacture or sell the product. Therefore, they were not liable.

However, the California Court of Appeals disagreed. In the ruling, the Court determined that Amazon played a significant role in the sale of the product, as the company:

  • Provided the product listing;
  • Stored it in an Amazon-owned warehouse; and
  • Shipped it with Amazon packaging.

Amazon successfully avoided liability in past cases like this one, but this decision could change that. Even with Amazon’s plan to appeal, this ruling establishes a precedent that could open the company – as well as other online retailers – to a considerable risk of more lawsuits and significant consequences.

What should business owners do?

Business owners know they could be held responsible for defective products they manufacture and sell. However, this ruling could substantially increase the liability businesses face, especially if they partner with third-party sellers.

And businesses of all sizes, including retail giant Walmart, are taking steps into the e-commerce world. Business owners considering this step should ensure they take great care when participating or collaborating in third-party marketplaces. They must consider the risks involved in this most recent ruling and make sure they proactively evaluate the liabilities they could face before making this move.