One of the first cases to decide whether e-commerce platforms can be considered a key part of the supply chain or whether it was integral to the sale of a defective product was Bolger v Amazon.com. In 2016, the trial court held that the defendant could not be held liable for a defective laptop battery which exploded and caused third-degree burns to the plaintiff. However, in August 2020, the California Court of Appeal reversed the lower court’s decision and - for the first time for an appeals court - concluded that “but for” the defendant’s “own acts” the plaintiff “would not have been injured” and therefore the defendant’s “own acts and its control over the product in question, form the basis for its liability”.
In reaching its decision, the court noted that the defendant’s business model encouraged consumers to interact directly with its website rather than those of third party sellers: customers place their products in the website’s “cart” and returns and exchanges are processed and managed by the defendant. Key to this decision was that California law is not limited to holding “sellers” liable for product defects and the California “doctrine of strict liability…cut[s] through such technicalities to compensate plaintiffs for injuries caused by defective products”.
Shortly following this, in April 2021, the California Court of Appeal in Loomis v Amazon.com [2021] also held the defendant liable as it considered it to be part of the product’s distribution chain.
Other states, like New York, generally hold an entity liable only if that entity qualifies as a “seller” in the transaction. In December 2020, a New York Supreme Court found that the defendant online platform exercised sufficient control over a thermostat, which allegedly caused a house fire, to be considered a “seller” because it had the power to refuse product registration, process customer returns, and prepare products for shipment, all while taking a cut of the profits and shipping the product in defendant-branded packaging (State Farm Fire & Cas Co. v Amazon.com, Inc. 2020 NY Slip Op 20326 (8 December 2020)).
Other courts have also found online platforms to be a “seller” based on their relationship with third-party sellers and the structure of its online marketplace which supported a finding that the platform controlled the allegedly defective product at issue (State Farm Fire & Cas. Co. v Amazon.com, Inc. (W.D. Wisc. 2019) (applying Wisconsin law).
Holding the online platform liable for defective third party products represents a shift by both the US courts and the public as to how they consider online marketplaces to be “pivotal in bringing the product…to the consumer.” Consumers have expanded the scope of their reliance on the supply chain and further examination is needed as to whether e-commerce platforms were key to the sale of defective products when assessing product liability.
Ultimate liability may turn on how courts define a “seller.” Recently, the Supreme Court of Texas, on certified question from the Fifth Circuit, held that the definition of “seller” did not extend to a defendant online platform in the context of third-party products when the company was being sued for a toddler’s injury from an allegedly defective remote control purchased on the online platform (Amazon.com Inc v McMillan [2021]).
Similarly, a federal district court applying Illinois law granted summary judgment on a negligent failure to warn claim against online platform defendant, finding that under Illinois law, the key criterion for being a “seller” under Illinois law was exercising control over the product, not over the purchasing process (Great Northern Ins. Company v Amazon.com, Inc. [2021]).
The Ninth Circuit, applying Arizona law, likewise held that the defendant online platform was not liable for a hoverboard sold on its platform that caught fire because they were not considered an “integral part of the enterprise,” [b]ut rather was more akin to the U.S. Post Office and lacked control or influence over the product (State Farm Fire & Cas. Co. v Amazon.com, Inc. (9th Cir. 2020)).
