If you purchase goods on Amazon, is the company liable?

If you purchase goods on Amazon, is the company liable?
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Each year, millions of consumers purchase goods on Amazon assuming that the products they buy are safe, have been vetted by Amazon, and are backed by the manufacturer that created them. But nothing could be further from the truth. This harsh reality is coming to a head in a case now pending before the Third Circuit Court of Appeals, where a woman has sued Amazon for injuries resulting from a product she purchased through one of Amazon’s third-party retailers (“TPRs”).

The broken dog collar case against Amazon

In the case of Oberdorf v. Amazon.com, Inc., Heather Oberdorf claims that she purchased a dog collar from the online retailer a few years back. While walking her dog using that collar, the dog lunged. That caused the D-ring on the collar to fail. The dog’s leash sprung back and hit Ms. Oberdorf square in the face. When all was said and done, she lost vision in one of her eyes as a result of the incident.

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When Oberdorf and her lawyers first began investigating the matter, they realized that the product had actually been purchased from one of Amazon’s TPRs that operated under the fictitious storefront name “The Furry Gang.” Unfortunately, when Ms. Oberdorf tried to reach that seller, the individuals who had been running The Furry Gang were nowhere to be found. In fact, neither Oberdorf or Amazon’s own private investigators were ever able to locate them.

Consequently, Oberdorf sued Amazon directly under theories of strict product liability, negligence, and breach of warranty, among others. The federal trial court granted Amazon’s motion for summary judgement, a decision that effectively dismissed the matter. The judge reasoned that Amazon could not be held liable under Pennsylvania’s strict liability laws because the company did not constitute the “seller” of the product. Rather, The Furry Gang was the seller and Amazon was a third-party to the transaction; a status that precluded it from liability. The ruling was tremendous news for Amazon, a company that sold $160 billion in merchandise through TPRs in 2018 alone.

Unfortunately for Amazon, a 3-judge panel from the Third Circuit later overruled the trial court’s opinion, finding that Amazon “should be considered a “seller” … [and therefore] Amazon is strictly liable for consumer injuries caused by defective goods purchased on Amazon.com” Most recently, the full panel from the Third Circuit has decided to reconsider the case. Undoubtedly, that decision will have major implications for Amazon’s business model going forward.

A cautionary tale of goods on amazon

The Oberdorf case presents a cautionary tale for consumers. Most people don’t realize that over half of the sales made on Amazon are conducted through TPRs. Understandably, they tend to believe that products purchased through Amazon are sold (and warrantied) by Amazon. That is simply not the case.

And, while many of the TPRs operating on Amazon’s site are legitimate, many -- like the Furry Gang -- are not. Indeed, according to Bruce Anderson of e-Enforce (an e-Commerce investigation and enforcement firm), “all too often, these TPRs are selling damaged, expired, or otherwise defective goods that they have obtained through illicit distribution channels. Because the products are marketed as ‘new,’ consumers typically have no idea that the products they’re purchasing through Amazon are dangerous.”

In fact, in many cases, the original manufacturer has no idea a TPR is selling brand-name goods on Amazon -- until the typical problems arise. As Anderson explains it, “Brands generally become aware of these unauthorized TPRs when they start getting a major uptick in negative reviews, see their prices dropping in online venues, and begin receiving angry phone calls from consumers.” All of this happens, of course, because illegitimate TPRs are obtaining substandard products at rock bottom prices, and then selling them as new on Amazon. Because they obtain the products so cheaply, they are able to beat out legitimate sellers on Amazon -- a company that favors those sellers who offer the lowest pricing.

What can consumers do to protect themselves against fake goods on amazon?

Fortunately, there are some things consumers can do to avoid the Oberdorf dilemma. Anderson’s firm suggests that Amazon buyers:

  1. Pay attention to who is selling the product they want to purchase from Amazon. Is it actually Amazon, or is it a TPR?
  2. If it is a TPR, check to see if the company has a website outside of the online marketplaces. If not, they may not be a legitimate company.
  3. Check consumer reviews of the seller on Amazon’s site. If the seller has received numerous negative reviews, it’s a good idea to buy from someone else, no matter how good a deal this particular seller is offering.
  4. Does the seller offer contact information outside of Amazon’s customer-communications portals? If not, good luck reaching them when you have a problem.
  5. Check the manufacturer’s website to see if this TPR is an approved retailer. Due to the massive problems brands are having with these unauthorized TPRs, many companies are now publishing lists of sellers who have the express right to sell the brand.

While these actions will go a long way toward protecting consumers against illegitimate TPRs, these wrongdoers are getting more crafty all the time. The more steps a consumer takes to protect herself from the bad apples, the more likely she’ll be to have a positive online shopping experience.

Since 2012, eEnforce has become the only online protection and enforcement firm that maintains the legal licensure and capabilities to identify unauthorized sellers down to their EIN or social security number and then legally enforce compliance with a brands trademark. Their proven process and cost efficiency has allowed eEnforce to work with over two-hundred brands that range from Global Fortune 100 brands, to smaller brands expanding their online sales to help them protect their brand from unauthorized online sellers and the consumers they serve. You can learn more at www.e-enforce.com or contact [email protected].

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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